Britain’s pay rises forecast to slow for the first time since the pandemic

UK wage growth in 2023 is expected to be lower than the previous year for the first time since the pandemic, according to a closely watched industry survey.

British employers expect to increase basic pay by an average of 4 percent this year, against an expected 5 percent jump through 2023 and the end of 2022, the Chartered Institute of Personnel and Development (CIPD) said.

The figures represent the first fall since early 2020, when Britain was grappling with the economic fallout from Covid-19.

Wage growth has been a key concern for the Bank of England and its efforts to control inflation, amid fears of a wage-price spiral.

UK wages before bonuses rose 7.3 per cent in the three months to October, according to the latest data from the Office for National Statistics, below the summer peak of 8.5 per cent.

Pay increases in the private sector and nonprofits were in line with the median projection, according to a YouGov survey.

However, public sector employers expect to increase wages by 3 percent and hire staff at the slowest pace since 2019.

Among the 2,006 employers surveyed as a whole, the proportion who said they were funding wage increases by reducing staff rose to 21 percent, up from 12 percent.

The proportion absorbing higher wage costs into profit margins or overhead expenses fell from 50 to 37 percent.

The figures are likely to boost confidence among Bank of England officials that domestic inflationary pressures are easing following recent sharp falls in energy prices, paving the way for lower interest rates later this year. .

CIPD economist Jon Boys said: “This looks like a key moment in the UK labor market.”

Earlier this month, the Bank of England kept the base rate at 5.25 percent as hawkish sentiment derailed hopes of a cut in March.

Its Monetary Policy Committee voted to keep the base rate unchanged by a six-to-three margin, and two members voted for another 25 basis point increase to 5.5 percent, as recent data does not They managed to calm concerns about wage growth and service inflation.

The Bank of England still believes consumer price inflation will “temporarily” fall back to 2 per cent in April, as the impact of previous increases take effect.

However, Governor Andrew Bailey left room for optimism, telling reporters that the MPC was actively considering when rate cuts should occur.