Home News Is the UK on the brink of a pay explosion?

Is the UK on the brink of a pay explosion?

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Wages graphic

One-in-two businesses are planning to grant their staff pay rises of more than 2% in the next year, according to a survey by the British Chambers of Commerce and the online recruitment company Indeed.

The survey, of more than 1,000 businesses of all sizes and across all sectors, reveals that 6% will increase pay by more than 5%.

Just under a third, 32%, plan to boost pay by between 2% and 5%, 12% will raise salaries in line with inflation, and 18% by between 1 and 2%.

Only 2% of businesses expect to decrease salaries.

Rob Johnston, Chief Executive of Cumbria Chamber of Commerce, said: “We would expect pay to increase as the labour market tightens making it harder for employers to attract the people they need.

“The latest unemployment figures show this trend is continuing. Unemployment in the last quarter fell by 65,000 taking the national unemployment rate down to 4%.

Rob Johnston
Rob Johnston

“In Cumbria unemployment is lower still. The jobless rate is as low as 2% in South Lakeland and 1.8% in Eden.

“We anticipate that the labour market here will get tighter still as our working-age population shrinks over the next decade.

“In that context, it’s surprising that pay isn’t rising faster than it is.

“We suspect that many businesses would like to raise salaries to attract and retain staff but they can’t because their margins are under pressure.

“There are several reasons for this.

“The weakness of the pound has pushed up the cost of imports.

“Then there are the costs imposed by government such as the annual increase in business rates and above-inflation increases in the National Living Wage and employers’ auto-enrolment pension contributions.

“All these costs restrict employers’ ability to raise pay across the board.”

The National Living Wage for over-25s increased by 4.4% in April, continuing the trend of above-inflation increases in 2016 and 2017.

The British Chambers/Indeed survey asked employers how they will cope with anticipated increases in the National Living Wage over the next three years.

Just over a third (37%) will respond by raising prices while 23% say they will accept lower margins and profits.

Around 16% say they will increase investment in automation, and the same proportion plan to adopt flexible practices such as using self-employed contractors to replace permanent staff.

Rob added: “The cost of wage increases has to be offset in some way, for example by greater productivity, lower costs or higher prices.

“To avoid future job losses, the Government must avoid any additional costs on business and help firms to boost productivity, for example by making it easier for firms to use the apprenticeship levy to upskill their staff.”

© Cumbria Chamber of Commerce

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