Is the great worker shortage finally coming to an end?

British workers have just experienced their highest pay rises for two years. With inflation remaining at the Bank of England’s target, the average worker has now seen their real term pay increase between March and May this year by just over 2 per cent – a level not seen since 2022. However, in cash terms there are clear signs that the heat has firmly left the labour market with pay growth beginning to slow.

This is good news for the new government and rate setters at the Bank of England who will need to decide next month whether it’s time for the first interest rate cuts. Doubts about a cut were raised earlier this week with services inflation – a core part of Britain’s economy – stickier than expected.