Pay rises in the UK are expected to slow for the first time since the pandemic
- Base pay is expected to rise by 4% in 2024, down from 5% last year
UK wage growth in 2023 is expected to be lower than the previous year for the first time since the pandemic, according to a closely watched industry survey.
The Chartered Institute of Personnel and Development (CIPD) said British employers expect basic pay to increase by an average of 4 per cent this year, down from an expected jump of 5 per cent through 2023 and late 2022.
These numbers represent the first decline since early 2020, when Britain suffered the economic repercussions of Covid-19.
Wage price inflation was a major concern for the Bank of England
Wage growth has been a key concern for the Bank of England and its efforts to tame inflation, amid fears of a wage price spiral.
UK wages before bonuses rose by 7.3 per cent in the three months to October, according to the latest Office for National Statistics data, down from the summer peak of 8.5 per cent.
According to a YouGov poll, pay increases in the private sector and non-profit organizations were in line with average expectations.
However, public sector employers expect a 3 percent pay increase and are hiring staff at the slowest pace since 2019.
Among the 2,006 employers surveyed as a whole, the proportion saying they finance wage increases through headcount reductions rose to 21 percent, from 12 percent.
The proportion who were absorbing higher wage costs into profit margins or general overhead fell to 37 percent from 50 percent.
These figures are likely to increase confidence among Bank of England policymakers that domestic inflation pressures are easing in the wake of the recent sharp decline in energy prices, paving the way for interest rate cuts later this year.
“This looks to be an important moment in the UK labor market,” said John Boyes, an economist at the CIPD.
Earlier this month, The Bank of England kept the base interest rate at 5.25 percent Tightening sentiment dampened hopes for a cut in March.
The Monetary Policy Committee voted to keep the key interest rate on hold by a margin of six to three, with two members voting in favor of a further increase of 25 basis points to 5.5 per cent, as the latest data failed to allay concerns about wage growth and services inflation.
The Bank of England still believes that consumer price inflation will fall “temporarily” to 2 per cent by April, as previous increases take effect.
However, Governor Andrew Bailey left room for optimism, telling reporters that the Monetary Policy Committee was now actively considering when interest rates should be cut.
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(tags for translation) Daily Mail