British workers set for best pay rise in a decade

BRITAIN is set for a pay rise as the world economy lifts growth and falling migration makes it harder for companies to find cheap foreign labour.

A report by the regional agents of the Bank of England suggests firms expect to give the average worker a 3.1pc pay rise in 2018, compared to 2.6pc last year, amid the strongest growth for a decade.

The upbeat report came as the International Monetary Fund upgraded its growth forecast for the nation’s economy.

‘Output growth remains positive and labour market performance strong,’ declared the IMF, which lifted its growth expectation for this year to 1.6pc just three weeks after predicting 1.5pc.

The Bank said firms are finding it harder to hire and hang on to good workers, and more staff are getting a raise because their costs are going up due to inflation.

Another key impact comes from the higher National Living Wage, which forces companies to give their lowest earners extra money. Businesses must also pay a higher proportion of staff’s wages into a pension pot for them. And it is increasingly difficult to hire foreign staff on lower pay as immigration slows, the agents said.

But pay rises could be even more generous than expected. Companies underestimated how much salaries would go up last year, with a 2.2pc boost expected.

The forecast is likely to raise fears the Bank’s Monetary Policy Committee will hike interest rates to tame inflation.

If rates rise to 0.75pc from their present near-record low of 0.5pc, it will help savers but hit mortgage borrowers.