ISSUE NO. 13 · WEDNESDAY 19 AUGUST 2026

Pay growth carried by the state, a decade of business costs carried by firms, and a prime London developer that ran out of cash

Britain's pay packet grew faster than the City expected — 4.1% including bonuses against a forecast of four. Then look at who paid for it. Public sector pay ran at 6.1% between April and June while the private sector managed 2.8%. Same economy, same three months, and the state side is doing almost all of the lifting. Vacancies fell by 6,000 to 707,000, the lowest in more than five years, and unemployment held at 4.9%.

The same shape turns up twice more today. Mid-sized firms have absorbed more than 75% in added costs over a decade — the living wage, pension auto-enrolment, employment taxes — and the word being offered back to them is resilience. At the other end of the scale, a boutique developer holding 20 luxury London properties worth over £30m has run out of cash and handed itself to administrators, in the same week the average Kensington and Chelsea home fell by more than £95,000. In each case the bill has already been paid by somebody. The argument is only about who.

Below in full: why the pay recovery is a transfer rather than a recovery, what a decade of added cost has actually bought British firms, and what one collapse says about London's safe haven. After those, the numbers, today's diary, and one calculator worth five minutes.

Lead

Total pay grew 4.1%. Public sector pay grew 6.1%; the private sector managed 2.8%.

Wage growth came in at 4.1% including bonuses against a market forecast of four, and 3.5% excluding them — a beat on the headline. The split underneath is where it stops being good news. Public sector pay ran at 6.1% in the three months to June while the private sector managed 2.8%, which makes the recovery in the national figure largely a transfer rather than a broad improvement in what work pays. Vacancies fell by 6,000 to 707,000, the lowest in more than five years, and unemployment held at 4.9%. If you are on the private side of that line, none of it feels like progress. The gap is worth watching in the next release, because pay growth funded by the state and pay growth funded by employers say different things about where inflation goes next — and the Bank has a decision on 17 September. Read the full story →

The Numbers

Bank Rate has not moved since December, and CPI is still June's 2.6% — for about one more hour. The gilt has ticked back up to 5.09% for August so far, a whisker under July's 5.10% and 1.34 points above Bank Rate. The index below is the close of Friday 14 August, the most recent settled session available.

More News

Costs for mid-sized firms are up more than 75% in a decade. The word offered back is resilience.

The British Chambers of Commerce wants the Chancellor to stop using it. Firms absorbed higher wages, employment taxes and energy bills through a decade in which growth never arrived, and Shevaun Haviland, who leads the BCC, says policymakers should start stripping costs out rather than piling them on. What John Healey has to fund at the same time is not small: household relief, devolution reforms and defence spending at 3% of GDP by 2030, with Capital Economics putting the extra revenue needed at about £25bn. The detail that lands hardest is a single Lancashire employer cutting apprentice hiring from 25 to one, set against Lloyds research showing 58% of firms lifting AI investment — money going into systems rather than people. Endurance is not a growth plan, and no amount of lobbying gets a firm out of a wage bill. Read the full story →

A developer holding £30m of London property has run out of cash.

London Richmond Ltd sold a simple pitch — 22 years of consecutive increases, 20 luxury properties, a capital that never really falls — and has now handed itself to administrators. It collapsed in the same week the average Kensington and Chelsea home fell to £1,552,970, more than £95,000 down on the month before. Prime London transactions hit their lowest level in a decade last year, as stamp duty and an exodus of wealthy buyers drained the top end. One developer running out of cash does not end an era, and it should not be read as one. What has changed is that the pitch stopped matching the tape, and the top end is now repricing in the open rather than quietly. Whether Kensington and Chelsea has found a floor or is still hunting for one is the next few months' question. Read the full story →

On the Diary

• Today, 7.00am BST — Consumer price inflation, July. The number the September rate decision is built on, with producer price inflation in the same slot. It landed an hour before this email.
• Today, 9.30am BST — Private rent and house prices, August. The official read on the market, in a week when the top of it is repricing in public.
• Tomorrow, 9.30am BST — Blue Book 2026: GDP impacts and expenditure components. The annual reconciliation of the national accounts. Dry, and it is where revisions to the growth figures actually come from.
• Tomorrow, 9.30am BST — Business insights and impact on the UK economy. The fortnightly survey of what firms are actually doing, which is the fastest read available on whether the cost complaints are turning into decisions.

The Toolbox

One tool from the site each issue, picked to fit what has just happened. Free, no sign-up, and it shows its workings.

Income tax calculator

"A 4.1% pay rise is a gross figure. This shows what is left of it once the bands and thresholds have taken their share, which is the version that reaches your account."

The Close

Three stories, one question underneath all of them: who is actually carrying it. The pay recovery is real, and the state is funding most of it. The decade of business costs is real, and mid-sized firms have absorbed all of it. The safe-haven premium was real, and whoever bought last is wearing it. None of that is an argument against any of the three — it is an argument for reading a headline figure twice, once for the number and once for the payer. July's inflation landed at seven this morning. The same test applies to it.

If something here is wrong, or there is something you want dug into, just reply. It comes straight to me.

MJB