UK Employers Expect to Give Lower Pay Rises in 2024, Signaling Softening Labor Market
British employers are anticipating average pay rises of 5% for their employees during the 12 months leading up to September 2024, according to a recent survey. This figure represents a decrease from the 6% pay rises seen over the past year, indicating a gradual softening of the UK’s labor market.
Sheila Attwood, senior content manager at XpertHR, commented on the findings, stating, “After a year of strong pay growth driven by a tight labor market, signs of a cooling market are beginning to emerge, influenced by a sustained period of higher interest rates.”
The Bank of England is closely monitoring the pay outlook as it evaluates whether its series of rate increases, initiated in December 2021, has reached its conclusion. BoE Chief Economist Huw Pill expressed concerns on Monday, suggesting that domestic pressures, such as robust pay growth, could lead to inflation stabilizing above the Bank’s 2% target, even if inflation falls due to more stable energy prices.
Prior to the pandemic, when inflation remained mostly close to target, average earnings typically grew at an annual rate of 3-4%. Median pay settlements were usually slightly below this range. However, XpertHR reported that the median pay award in the 12 months leading up to September was 6%, up from 4% in the 12 months to September 2022, reflecting a significant rise in inflation.
The survey also revealed that the median pay award in the public sector was 6.1%, the highest recorded since 1992, just slightly above the median of 6.0% in the private sector.
Later today, official data is expected to show that consumer prices increased by 6.6% in the year to September 2023, according to a Reuters poll of economists. This figure represents a decrease from the peak of 11.1% recorded in October 2022.
XpertHR noted that the median pay settlement in the three months leading up to September was 5.4%, up from 5% in the three months to August.
The September data was based on 66 pay awards, covering nearly 1 million employees, while the year-ahead forecast relied on the views of 201 organizations representing almost 600,000 employees.
More detail via Reuters here… ( Image via Reuters )