LONDON (Reuters) — British employers expect to raise pay by a subdued 1.8 per cent in the coming year, slowing from expectations for increases of two per cent three months ago, according to a quarterly survey of personnel managers.
In a report that underscores how Britain's economic recovery has yet to make a big difference in earnings for many workers, the Chartered Institute of Personnel and Development's (CIPD) said pay growth was half the rate recorded in the spring of 2008, before the financial crisis.
The survey's net employment balance — which measures the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease levels in the second quarter of 2015 — increased to +25 from +24.
"The new government may be inheriting a strong labour market, but people's pay packets are only seeing very modest improvements, if at all," Gerwyn Davies, a labour market analyst at CIPD, said.
Wages were not going up more strongly due to a combination of low levels of people switching jobs; migrants and welfare claimants joining the labour market; and older workers staying in work for longer, he said.
"In addition, word has spread that inflation is expected to remain very low this year so it's no surprise that many employers are hitting the pause button on pay," Davies said.
Business investment was strong but spending on training was falling, frustrating hopes for an increase in productivity that is needed to push up wages more quickly, CIPD said.
The Bank of England is watching pay growth closely as it considers when to start raising interest rates which have sat at a record low of 0.5 per cent for more than six years.
Official data due on Wednesday is expected to show overall pay growth of 1.7 per cent in the first quarter of 2015.
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