LONDON (Reuters) – British employers continued to offer annual pay deals averaging 2.5 percent in June, the highest since the 2008 financial crisis, according to industry data that is likely to bolster the Bank of England’s view that inflation pressures are building.
FILE PHOTO: People cast long shadows in the winter sunlight as they walk across a plaza in the Canary Wharf financial district of London, Britain, January 17, 2018. REUTERS/Dylan Martinez/File Photo
Wage data providers XpertHR said June was the sixth consecutive month when median pay deals stood at 2.5 percent, after not regularly exceeding 2 percent since late 2008.
Wages have lagged behind inflation for much of that period, squeezing the spending power of many households.
But with pay increases picking up a bit of speed, most economists expect the Bank of England to raise its key interest rate next week for only the second time since before the 2008 crisis to keep domestic inflation pressures in check.
The BoE forecast in May that average earnings growth – which typically slightly exceeds annual pay rises – would increase to 3 percent by the end of the year, potentially stopping inflation from returning to its 2 percent target unless it raises rates.
Upward pressure on pay is likely to persist with the government loosening curbs on public-sector wages that have been in place since 2010 as part of austerity measures.
More than 1 million teachers, doctors, military and police officers will receive pay rises of 2 percent or higher, after years of pay rises being largely restricted to 1 percent, the government announced this week.
“The current run of higher pay awards looks set to continue as we head into the quieter months of the pay bargaining year,” XpertHR analyst Sheila Attwood said.
Factory workers are seeing the fastest pay rises, with a median 3 percent annual pay deal, the data showed.
By contrast, separate figures from the British Retail Consortium showed an ongoing squeeze on shop staff. The number of employees and hours worked in the sector are both down by almost 3 percent compared with last year, and full-time workers have been especially hard hit.
“Retailers seek greater flexibility in their workforce to cope with the pressure felt from the diverging costs of labour versus technology,” BRC Chief Executive Helen Dickinson said.
Reporting by David Milliken