The North and Midlands Lead UK in Wage Growth as Regional Pay Rises Outpace London.

The UK’s SME labour market is undergoing a noticeable geographic shift, with The North and Midlands emerging as the top performers in wage growth. According to Employment Hero’s June 2025 Jobs Report, these regions saw the strongest salary gains in both monthly and annual comparisons ,  a clear signal that economic momentum is building outside the capital.

Salaries in The North surged 11.1% year-on-year and 7.1% quarter-on-quarter, making it the leading region for pay growth. Despite a slight 1.6% drop in June, the long-term trajectory remains robust. Meanwhile, the Midlands posted a 9.4% year-on-year rise, with a steady 1.8% increase month-on-month.

In comparison, London, traditionally the UK’s wage leader, experienced more mixed results. Wages in the capital grew by 4.0% in June, bouncing back from three consecutive months of decline. However, on a quarterly basis, average wages only rose 0.6% and the year-on-year figure remains underwhelming at just 0.8%,  trailing well behind inflation.

“London and the South have traditionally led the way on wage growth in the UK, so it’s encouraging to see momentum building across the North and Midlands, regions that have been hugely impacted by the cost-of-living crunch. This uplift will be a welcome sign for workers and for SMEs, it points to growing confidence and a more resilient period ahead. The focus now must be on sustained support from the Government to help ensure this positive trend continues.” Said Kevin Fitzgerald, UK Managing Director of Employment Hero.

The strength of The North and Midlands isn’t limited to pay alone. Employment figures in both regions also tell a positive story. In the Midlands and North combined, the employment rate grew by 1.7% in June and 2.1% compared to three months ago. This aligns with broader patterns of regional investment and rebalancing efforts by both the government and private sector.

Wider economic factors also help explain the disparity. With London experiencing stagnant wage growth and higher living costs, many SMEs are increasingly hiring and expanding operations in more affordable regions. This shift is reinforced by flexible work policies and digital infrastructure improvements, allowing companies to operate effectively beyond traditional business hubs.

Still, the recent uptick in London salaries, driven primarily by full-time employment growth,  indicates that the capital is far from losing its economic weight. Full-time roles in London rose 4% in June, contrasting with a 1.8% decline in part-time and casual positions. Even so, the capital’s 3-month average for wage growth remains in the negative at -3.4%.

The data underlines an evolving UK labour market, one where talent attraction, cost control, and economic pressures are pushing SMEs to rethink geography. For policymakers and business leaders, these trends reinforce the importance of continued investment in regional infrastructure, skills training, and local business ecosystems.

For SMEs based in or expanding to The North and Midlands, the current momentum presents a window of opportunity. Competitive wages, improving employment rates, and lower operating costs make these regions increasingly attractive for sustainable growth.

As Fitzgerald notes, “The focus now must be on sustained support from the Government to help ensure this positive trend continues.”