Pay growth at lowest rate in more than five years

Pay growth has fallen to its lowest rate in more than five years, according to the latest official figures.

Annual earnings - excluding bonuses - grew at an annual rate of 3.8% in the November to January period, the Office for National Statistics (ONS) said.

The figures also showed that the unemployment rate remained unchanged at 5.2%.

The number of vacancies remained "largely stable", the ONS said, with declines in openings at smaller firms being offset by rises among larger ones.

Despite the slowdown in pay growth from its previous figure of 4.2%, wages are still rising faster than the rate of price increases, with inflation currently standing at 3%.

The ONS said regular earnings growth was 5.9% for the public sector and 3.3% for the private sector.

The latest figures come ahead of the latest decision on interest rates from Bank of England's Monetary Policy Committee (MPC), which is expected to keep the cost of borrowing unchanged.

Until the outbreak of the US-Israeli war with Iran there had been speculation the Bank might cut rates, but this is not expected now as the recent conflict has pushed up the price of fuel and some energy costs.

Yael Selfin, chief economist at KPMG UK, said a cut in interest rates was unlikely.

"Priorities have shifted, with MPC members set to turn their attention to the new upside risks to the inflation outlook.

"This could see interest rates staying higher for longer, raising the prospect of a more pronounced loosening in the labour market over the coming months."

Even though inflation could be about to increase, she does not think this will lead to a surge in pay demands .

"Demand for labour is weak, which should curtail workers' bargaining power and limit the scope for a pick-up in wage growth."