U.K. employers plan smallest pay rises since 2013: Survey

Living standards a hot political topic ahead of June 8 national election

U.K. employers plan smallest pay rises since 2013: Survey
Men drink coffee as they stand in Canary Wharf in London, May 5. British employers on average expected to raise basic pay awards in the year ahead by 1.0 per cent. REUTERS/Marika Kochiashvili

LONDON (Reuters) — British employers plan to increase pay at the weakest rate since 2013, a survey showed on Monday, offering poor prospects for British households already strained by higher inflation since last year's Brexit vote.

Employers on average expected to raise basic pay awards in the year ahead by 1.0 per cent, down from 1.5 per cent in the previous quarter's survey, the Chartered Institute of Personnel and Development (CIPD) said.

Last week Bank of England Governor Mark Carney warned that households faced a challenging time, as wage growth was set to turn negative in inflation-adjusted terms.

Rising inflation, fuelled by rising energy costs and the pound's post-Brexit vote plunge, almost completely cancelled out the growth in pay of British workers during the three months to February, official data showed last month.

Living standards are a hot political topic ahead of a June 8 national election. Prime Minister Theresa May will promise on Monday to extend British workers' rights in a push to win over supporters of the opposition Labour Party.

While the BoE's expectation for solid economic growth in the next few years hinges on wage growth picking up significantly, the CIPD survey showed no sign that employers are thinking about ratcheting up pay as yet.

Gerwyn Davies, labour market adviser at the CIPD, said weak pay partly reflected British businesses' long-standing difficulties at raising productivity, and said he expected living standards would fall for many employees this year.

"This could create higher levels of economic insecurity and could have serious implications for consumer spending, which has helped to support economic growth in recent months."

Other indicators of future wage growth, like the monthly REC survey and the Bank of England's regional agents' report, have pointed to a dearth of upward pressure on pay.

The government capped annual basic pay rises for most public-sector workers at 1 per cent in 2013, after a three-year pay freeze.

The CIPD said pay expectations for the private sector held steady at 2.0 per cent, but weakened in the voluntary sector and were stuck at 1.0 per cent in the public sector.

Still, the survey suggested employment will continue to increase in the second quarter, albeit at a slower rate than at the start of this year.

Official monthly labour market data are due on Wednesday. Economists polled by Reuters expect growth in average weekly earnings, excluding bonuses, held steady at 2.2 per cent in the three months to March.


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