UK employers planning smallest pay rises since 2013

British employers plan to increase pay at the weakest rate since 2013, a survey shows, offering poor prospects for British households already strained by higher inflation since last year’s Brexit vote.

Employers on average expected to raise basic pay awards in the year ahead by 1%, down from 1.5% in the previous quarter’s survey, the Chartered Institute of Personnel and Development (CIPD) said.

Last week, Bank of England Governor Mark Carney warned that households faced a challenging time, as wage growth was set to turn negative in inflation- adjusted terms.

Rising inflation, fuelled by rising energy costs and the pound’s post-Brexit vote plunge, almost completely cancelled out the growth in salaries of British workers during the three months to February, official data showed last month.

Living standards are a hot political topic ahead of the UK’s June 8 national election. British prime minister Theresa May has promised to extend British workers’ rights in a push to win over Labour Party supporters.

While the BoE’s expectation for solid economic growth in the next few years hinges on wage growth picking up significantly, the CIPD survey showed no sign that employers are thinking about ratcheting up pay yet.

Gerwyn Davies, labour market adviser at the CIPD, said weak pay partly reflected British businesses’ long-standing difficulties at raising productivity, and said he expected living standards would fall for many employees this year.

“This could create higher levels of economic insecurity and could have serious implications for consumer spending, which has helped to support economic growth in recent months,” he said.

Other indicators of future wage growth, such as the monthly REC survey and the Bank of England’s regional agents’ report, point to a lack of upward pressure on pay.

The British government capped annual basic pay rises for most public-sector workers at 1% in 2013, after a three-year pay freeze. The CIPD said pay expectations for the private sector held steady at 2%, but weakened in the voluntary sector and were stuck at 1% in the public sector.



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