UK employers plan 4% pay rises in coming year
British employers expect to raise wages by 4% over the coming 12 months, a similar rate to three months ago, according to an industry survey that suggested businesses were less willing to take on higher labour costs.
The Chartered Institute of Personnel and Development (CIPD) said expected median pay settlements in the private sector for the coming 12 months was unchanged at 4%, while expectations in the public sector remained at 3%.
British consumer price inflation slowed to 3.2% in March and the Bank of England (BOE) expects it to have eased further to around 2% in April after a reduction in regulated energy prices.
“While employers’ pay rise expectations remain above pre-pandemic levels, we would expect them to adjust their plans for pay rises in the coming months, as inflation falls and the labour market continues to slow,” James Cockett, labour market economist at the CIPD, said.
The Resolution Foundation think tank, in a separate report yesterday, also said the current growth in inflation-adjusted wages looked unsustainable.
“Unless productivity picks up, wage growth will peter out, or pay rises will simply be passed on through higher prices and prolong our inflation problems,” Resolution Foundation research director Greg Thwaites said.
A BOE survey of employers, published last Thursday, showed they expected to raise wages by 4.6% over the coming year, the smallest amount since the series started in May 2022.
Official labour market figures are expected to show a small slowdown in wage growth today.
Economists polled by Reuters forecast regular pay to have increased by 5.9% in March, slightly below the 6.0% rise in the month before.
Wage growth tends to be faster than growth in pay settlements in Britain, as the latter does not include gains made by workers who move to better paid jobs.
Although the BOE held interest rates at a 16-year high last week and signalled it could be on course to cut rates at its next meeting in June, it is still closely monitoring wage growth which threatens to push up inflation.
The BOE is now forecasting wage growth of 5.25% for 2024, up from a 4% forecast in February.
The CIPD survey of 2,009 employers took place between March 26 and April 18. — Reuters