While data shows a challenging picture for employment, cooling wage growth across the UK has fuelled speculation of a pre-Christmas interest rate cut from the Bank of England.

Early estimates for October 2025 show median monthly pay in Scotland rose by 3.6% over the year to £2,581, outpacing the 3.1% growth seen across the UK. However, the number of payrolled employees in Scotland fell by 0.6% (16,000) over the same period, mirroring the national trend.

Labour Force Survey (LFS) data for July to September 2025 indicates a confusing trend where both the employment and unemployment rates decreased simultaneously. Scotland’s employment rate (16-64) fell 0.7 percentage points to 74.3%, while the unemployment rate (16+) dipped 0.1 points to 3.7%. This was driven by a 0.8 percentage point rise in the economic inactivity rate, which now stands at 22.8% – higher than the UK’s 21.0%.

Ann Frances Cooney, an employment expert at DWF, noted that employers face “intensified financial challenges” from inflation and rising National Insurance contributions, while staff seek pay to match living costs. She added that businesses are prioritising “workforce resilience” ahead of an expected Employment Rights Bill, and are looking to the Autumn Budget for “clearer policy signals”.

The cooling labour market, particularly slowing private sector pay growth, has led experts to suggest a Bank of England rate cut is imminent. Matt Swannell of the EY ITEM Club noted that cooling pay “removes one potential roadblock” to a December cut.

Kevin Brown of Scottish Friendly agreed, stating the odds of a cut are “rising fast”, which would be a “welcome gift” for borrowers. However, he cautioned that “time is running out” for savers to “lock into the best deals” before rates disappear.