Britain's jump in pay closely watched in Ireland as economy reopens after Covid      

Ibec chief economist Gerard Brady said Ireland may face the same wage pressures as those that are building in Britain because the UK is further on the road to reopening. 

A large rise in workers' pay in Britain as its economy emerges from lockdown is being closely watched in Ireland for signs that wage pressures will add to the widespread price hikes sparked by the resurgent global economy. 

New figures from the British statistics office showed average total pay for employees grew 5.6% in the three months to the end of April from a year earlier, when the pandemic was first hitting hard. 

Because so many low-paid workers were on government supports, the pay figures may overstate the true picture, but still point to a large jump in wages across large parts of the British economy. 

Thomas Pugh, UK economist at Capital Economics in London, said in a research note that it expected the figures in the coming months to show a further rise in average employee pay in Britain "and we expect headline pay growth to peak at around 8% in June due to base and compositional effects".

"The data released today paint a picture of a [UK] labour market well on its way to recovery," he said, but "we think there is enough slack in the labour market to prevent a big rise in underlying pay, which could put some upward pressure on inflation".

Gerard Brady, chief economist at business group Ibec, said Ireland may face the same pressures as those that are building in Britain because the UK is further on the road to reopening. 

"If you look at where the shortages in the economy were before the crisis in terms of high skills, they are still going to be there when we come out of the crisis, and we saw half of our members giving a pay increase in 2020," despite the pandemic, Mr Brady said. 

"And you can expect that to continue because many of the sectors that got pay increases over the last couple of years, particularly the high-tech sectors, have continued to operate as normal effectively, to still have the same challenges around retention and hiring," he added.  

Wage pressures before pandemic

Mr Brady said "across the board" in IT and pharma manufacturing there were wage pressures before the pandemic, and those challenges for employers would likely continue.  

The figures from the British statistics office, the ONS, underlined the strength of the rebound of its labour market from the Covid restrictions, and will be closely watched by businesses in Ireland.    

The UK started easing its Covid restrictions a few weeks earlier than in the Republic, even though prime minister Boris Johnson this week announced delays in reopening fully, amid concerns about the number of Delta variant cases in England.

The ONS said the number of workers increased in May for the sixth month in a row, to 28.5m, but was still 553,000 below levels before the onset of the pandemic. 

UK accommodation and food service jobs, the under 25s, and people living in London have taken the worst hits, and are still well below pre-pandemic levels of employment. Also below pre-pandemic levels are total hours worked, the ONS said, but the number of job vacancies in Britain is close to returning to pre-crisis levels, according to the ONS.