Peak growth: People walk past shops with the London financial district in the background. Nearly all employers in the UK have noted pressure to increase pay deals, with the majority citing inflation, labour shortages and the need to offer competitive pay. — Reuters
LONDON: British employers expect pay settlements over 2023 as a whole to average 5%, down slightly from the 32-year high of 6% recorded during the three months to the end of February, new industry data show.
“Our forecast indicates that pay awards may have reached their peak and will settle throughout the course of the year,” said Sheila Attwood, senior content manager at XpertHR.
The forecast is based on a survey of 266 organisations which employ a total of more than 300,000 staff.
If pay growth has peaked, this will be welcome news for the Bank of England (BoE).
The central bank is concerned that double-digit inflation will be harder to tame if pay awards keep growing.
However, nearly all employers noted pressure to increase pay deals, with the majority citing inflation, labour shortages and the need to offer competitive pay.
Pay awards in the three months to the end of February averaged 6%, unchanged from the three months to the end of January and the joint highest since September 1991.
This is according to XpertHR’s analysis of 198 pay awards covering 450,000 staff.
XpertHR said the rising national living wage, which will increase by 9.7% next month for people aged 23 and over, was also putting upward pressure on pay deals.
Pay awards remain well below the rate of inflation.
Consumer price inflation has fallen slightly since it hit a 42-year of 11.1% in October last year, and was 10.1% in January.
The country’s budget forecaster, the Office for Budget Responsibility or OBR, last week forecast inflation would fall to 2.9% by the end of 2023. However, it added Britain remained on track for a record fall in living standards over the two years to March 2024.
The drop in real household disposable income per capita, a measure of living standards, is less than the 7% fall expected in November, but will still represent the largest two-year fall since records began in the 1950s.
When the OBR closed its forecast in February, it foresaw the terminal BoE interest rate at 4.25% later this year, compared to 5%, as had been assumed in November.
February inflation data due is forecast to show a fall to 9.9%.
A narrow majority of economists polled by Reuters expect the BoE to raise its main interest rate soon to 4.25% from 4%. — Reuters
