British Employers Hold Steady on Wage Increase Expectations
In a recent industry survey, British employers have indicated an expectation to raise wages by 4 percent over the next year, mirroring the rate from three months prior. This consistency suggests a cautious approach to managing labour costs amidst economic uncertainties.
The Chartered Institute of Personnel and Development (CIPD) reported that the anticipated median pay settlements in the private sector remain at 4 percent, with the public sector’s expectations holding at 3 percent. This comes as British consumer price inflation showed signs of deceleration, dropping to 3.2 percent in March, with projections from the Bank of England (BoE) for a further decrease to around 2 percent in April following a cut in regulated energy prices.
James Cockett, a labour market economist at the CIPD, commented on the findings, “While employers’ pay rise expectations remain above pre-pandemic levels, we would expect them to adjust their plans for pay rises in the coming months, as inflation falls and the labour market continues to slow.”
Concurrently, the Resolution Foundation think tank raised concerns over the sustainability of current wage growth trends. Research Director Greg Thwaites stated, “Unless productivity picks up, wage growth will peter out, or pay rises will simply be passed on through higher prices and prolong our inflation problems.”
A separate BoE survey of employers revealed an anticipated wage increase of 4.6 percent for the upcoming year, marking the smallest projection since May 2022. Meanwhile, official labour market figures are expected to reflect a slight deceleration in wage growth, with economists predicting a 5.9 percent rise in regular pay for March, a tad lower than the previous month’s 6.0 percent increase.
It’s important to note that wage growth in Britain often outpaces growth in pay settlements, as it includes advancements made by workers moving into better-paid positions. Despite the BoE maintaining interest rates at a 16-year peak and hinting at potential rate cuts in June, it remains vigilant over wage growth, which poses a risk of fuelling further inflation. The BoE has adjusted its wage growth forecast for 2024 to 5.25 percent from February’s prediction of 4 percent.
The CIPD survey gathered insights from 2,009 employers between March 26 and April 18, providing a snapshot of business sentiment regarding compensation trends amidst evolving economic conditions.
