LONDON — Wages in Britain are forecast to rise by the lowest rate in three and a half years, according to a new survey of employers.
A survey of over 1,000 companies by recruiter Adecco and the Chartered Institute of Personnel and Development (CIPD) found employers are planning to raise staff pay by an average of just 1% in the year ahead. That is the lowest rate of pay increase recorded by the quarterly survey in three and a half years.
The expected slowdown in pay growth amounts to a real-world pay cut for staff, as prices in Britain are rising rapidly.
Inflation is currently running at 2.3% and the Bank of England last week said it expects inflation to peak at close to 3% towards the end of the year.
Gerwyn Davies, Labour Market Adviser at the CIPD, says in a release: “There is a real risk that a significant proportion of UK workers will see a fall in their living standards as the year progresses, due to a slowdown in basic pay and expectations of inflation increases over the next few months.
“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.”
Bank of England Governor Mark Carney said last week that “both household spending and GDP growth have slowed markedly” in recent months, saying it is a delayed effect of Britain’s vote last year to leave the European Union. The pound collapsed against the dollar and the euro in the wake of last June’s vote and has not recovered since. This has made the cost of importing goods such as food and clothing more expensive, hence the price rises.
Despite the expected wage growth slowdown, Adecco and CIPD’s survey found companies are still planning to hire, suggesting inflation is not hitting the bottom line of businesses yet. The net employment balance, which measures the difference between the share of employers expanding their workforce and the share of employers reducing their workforce, stands at +20, slightly down from the previous quarter’s figure of +23.
Alex Fleming, Managing Director of Adecco UK & Ireland, says in a release: “Not only is employment confidence high in some sectors but also, promisingly, this quarter’s net employment balance remained positive.”
Fleming flags evidence of a skills shortage in Britain, with 56% of employers saying they are struggling to fill all their vacancies. This is most apparent in the manufacturing and production industries.
Fleming says: “Skills shortages continue to be evident in the UK labour market and employers need to be addressing this issue head-on with thorough planning.
“UK employers need to take investment in skills and people seriously to protect the future of our economy.”
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