UK employers see pay growth slowing to 5% in 2024: XpertHR

By David Milliken

LONDON (Reuters) – According to a recent survey, British employers anticipate providing their employees with an average pay increase of 5% in the 12-month period ending in September 2024. This figure is lower than the 6% increase observed in the past year, signaling a softening labor market in Britain.

“Following a year of robust pay growth fueled by a tight labor market, we are now seeing signs of a cooling market, influenced by a sustained period of higher interest rates,” stated XpertHR’s Senior Content Manager Sheila Attwood.

The Bank of England is closely monitoring the pay outlook as it deliberates whether its series of rate increases, initiated in December 2021, has reached its conclusion.

Expressing concern, BoE Chief Economist Huw Pill noted that domestic pressures like strong wage growth could lead to inflation stabilizing above the Bank’s 2% target, even if inflation decreases due to more stable energy prices.

Before the pandemic, when inflation largely remained near target, average earnings typically grew at an annual rate of 3-4%, with median pay settlements slightly below that range.

For the 12 months leading up to September, XpertHR reported a median pay increase of 6%, up from 4% in the preceding 12 months, reflecting a significant inflation surge.

In the public sector, the median pay increase was 6.1%, the highest recorded since 1992 and slightly above the private sector’s median increase of 6.0%.

According to a Reuters poll of economists, official data set to be released later today is expected to demonstrate a 6.6% rise in consumer prices in the year leading up to September 2023. This is a decrease from the peak of 11.1% observed in October 2022.

During the three months up until September, XpertHR reported a median pay increase of 5.4%, up from 5% in the three months ending in August.

The September data was based on 66 pay awards encompassing almost 1 million employees, while the year-ahead forecast was derived from responses from 201 organizations representing nearly 600,000 employees.

(Reporting by David Milliken, editing by Andy Bruce)