From Yahoo Finance: 2025-05-09 01:00:00

Wage growth has slowed sharply since Rachel Reeves’s Budget tax raid. Pay growth has decreased from over 8% in 2023 to below 6% currently, with a further decline predicted to 3.5% in a year. The tax raid on National Insurance Contributions is hitting businesses hard, leading to lower wages and higher prices.

The impact of the National Insurance increase is contributing to inflation, which is expected to peak at 3.5% in the third quarter of the year. Businesses are feeling the pressure, with small and medium-sized enterprises particularly affected. The Bank of England is staying vigilant to prevent another wave of inflation.

Global oil and gas prices have dropped, potentially leading to a cut in energy prices and reduced household bills. Chinese goods are seeking buyers outside the US due to tariffs, which could flood the UK with discounted imports. Inflation is expected to fall back to the 2% target in early 2027, allowing for potential interest rate cuts.

Trump’s trade policies may lower inflation in the UK, offering relief to workers facing underwhelming pay rises. The Bank of England predicts a decrease in inflation and a potential return to the 2% target earlier than anticipated. Lower mortgage payments could help workers cope with financial challenges amidst uncertain economic conditions.

Read more: Rachel Reeves brings the era of big pay rises to a crushing end