Just one in five employers plans wage increases above inflation which could leave workers with a renewed cost of living squeeze, new analysis warns.
Amid rising energy bills, a survey of 1,001 senior business leaders, conducted by Survation for the Work Foundation at Lancaster University, found that only 22% are planning to provide pay rises above inflation this year. This falls to one in six (16%) for businesses with fewer than 50 employees.
Official statistics indicate wage increases have recently slowed to their weakest rate in five years, with average regular pay rising by just 0.1% in real terms as inflation remains high.
Researchers warn that elevated energy and fuel costs, driven by ongoing instability in the Middle East, could push workers into a renewed period of shrinking real wages.
Despite pressure on wages, better weather and World Cup optimism helped drive consumers into the shops in June with Scotland’s retailers enjoying their best monthly performance for three years.
Total sales in Scotland increased by 7.5% compared with June 2025, when they had decreased by 0.4%. This was above the 3-month average increase of 3.5% and above the 12-month average increase of 1.4%. Adjusted for inflation, there was a year-on-year increase of 6.3%.
David Lonsdale, director at the Scottish Retail Consortium, said it was “positive news after a lengthy period of decidedly tepid sales growth.
“These are unalloyed positive results and provided a final flourish to the first half of the year. Whether the good news can be sustained however remains unclear given continuing pressures on household finances.
“With a new Prime Minister about to take office retailers will be hoping he can make good on his pledges on living standards and of a high street renaissance, whilst showing sufficient dexterity towards keeping a tight lid on the tax and regulatory costs under his control.”
A Starbucks franchisee, OCO, will create 120 jobs as part of a £4m investment in 29 stores across Scotland and the north of England by the end of next year.
In a trading update today, fashion chain Burberry met analysts’ expectations for sales growth in its April-June quarter thanks to strong spending in the US, while it said conflict in the Middle East impacted tourist spending in Europe.
Comparable store sales grew 5%, in line with expectations, while sales in the Europe and Middle East region fell 3%.
Cost of living still a concern
Separate ONS data shows nine in ten adults (89%) still see the cost of living as the biggest issue facing the UK. Before Ofgem’s energy price cap rise on 1 July, one in three people (34%) said they were struggling to afford energy bills, while one in four (25%) could not cover an unexpected £850 cost.
Against this backdrop, the new employer survey suggests most businesses (82%) are providing some support to staff to help deal with rising costs. Extending benefits options is the most common form of support being offered. However, one in seven employers (15%) say they are not providing any cost of living support, and this rises to 29% for small businesses.
Ben Harrison, director of the Work Foundation at Lancaster University, said: “Repeated periods of stagnant wage growth and sustained increases in the cost of essentials have left many households with little financial resilience to cope with any further economic shocks.
“Most employers are actively looking for ways to support their staff, but many are facing the pressures of rising costs too. This underlines the importance of Andy Burnham’s recent promise to prioritise short-term cost of living relief, and for the Government to focus on delivering good growth in every postcode in the years ahead.”
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