Private-Sector Wage Growth Hits a Six-Year Low, What Does It Mean for Hospitality?

Private sector wage growth has fallen below 3%, reaching its lowest level since 2020.

Meanwhile, annual wage growth across the public sector stands at 5.5%, although the figures have been influenced partly by the timing of NHS pay awards.

Let me be clear: this is not an argument against public-sector workers receiving better pay. Nurses, teachers, carers, and emergency-service workers deserve to be paid properly.

But the growing gap between the two sectors raises an uncomfortable question, and this is of course directed at the government.

Followed quickly by if our businesses are slowing to create jobs and are "holding wage costs". But ultimately, that is because they are having to watch every cost just to keep the business alive. And, once again, that also affects how much money ends up going back into HMRC’s coffers.

There can sometimes be an assumption that private businesses simply choose not to increase wages. The reality, particularly in hospitality, is very different.

Most good operators want to pay their teams more. We understand that looking after employees helps us retain experience, deliver better service, and build stronger businesses.

Happy staff generally means happy customers.

But a wage increase must come from somewhere, and hospitality businesses are already facing high employment costs, high business rates, high energy bills, high food prices and in turn with transport & fuel, etc. And high supplier charges too.

Unlike the Government, an independent hotel, pub, or restaurant cannot borrow indefinitely or raise taxes. It must earn money before it can be spent.

The latest figures also show the continuing weakening jobs market.

The UK lost approximately 4,000 payroll jobs in June, despite forecasts suggesting 20,000 would be added. Vacancies fell by another 7,000 as smaller businesses reduced recruitment to control costs.

That is particularly concerning hospitality.

Our industry creates thousands of entry-level positions and offers opportunities to people who may not have qualifications or previous experience. It provides flexible work, builds confidence, and allows people to develop careers from the ground up.

But when the cost of employing someone continues to rise, businesses become more cautious about recruiting. Vacancies are left unfilled, hours are reduced, and opportunities disappear.

You cannot encourage businesses to create more jobs while making every new employee considerably more expensive.

This is not only a staffing problem for hospitality. It is also a customer-spending problem.

When private-sector wages barely grow but household costs continue rising, people have less disposable income.

Meals out, hotel stays and trips to the pub are often among the first things households cut back on. Operators are therefore being squeezed from both directions: it costs more to open the doors, while customers have less money to spend once they walk through them.

Increasing prices might protect the margin temporarily, but it can also push hospitality further out of reach.

Rachel Reeves has now left the Treasury, with John Healey becoming the new Chancellor.

He inherits a difficult situation. Businesses need stability, but they also need acknowledgement that the current direction is not sustainable.

This is not about choosing between public and private sector workers. Both deserve fair wages and financial security.

It is about creating an economy in which private businesses can afford to employ people, invest, grow, and contribute toward the public services we all depend upon.

The new Chancellor has an opportunity to reset that relationship.

Hospitality does not need more warm words about its importance. It needs meaningful action on business rates FOR ALL – aka not just pubs, employment costs and the wider cost of doing business.

Because if private-sector wages, recruitment and investment continue slowing, the effects will not remain private for very long.