Pay Awards Decline in the UK

(Reuters) – Pay awards granted by British employers fell during the three months to July, according to a survey on Wednesday that aligned with Bank of England forecasts for slowing wage growth.

Median basic pay settlements in the three months to July were 4.5% higher than a year earlier, marking the smallest rise since the three months to April and down from 5% in the preceding three months, reported human resources data provider Brightmine.

Brightmine noted that pay deals are likely to further slow heading into 2025.

Sheila Attwood, senior content manager at Brightmine, stated, “Employers that have made pay awards this year have already reacted to the declining inflation environment by implementing lower pay awards than last year.”

She added, “This trend is expected to continue among those concluding deals later in the year, as they are likely to agree on increases lower than those seen so far.”

A recent survey by the Chartered Institute of Personnel and Development revealed employers planned a 3% pay increase for the coming year, while a Bank of England survey indicated a 4.1% rise.

Official data last week indicated British pay grew at its slowest annual pace in nearly two years during the second quarter of 2024, alongside a surprising drop in unemployment, albeit based on a survey undergoing major changes.

On August 1, when the BoE cut interest rates after maintaining them at 5.25% for nearly a year, it stated it would closely monitor wage growth. Investors currently see a roughly one-in-three chance of a rate cut in September.

According to the official earnings measure, pay is still growing at nearly double the pace the BoE believes is sustainable for keeping inflation at its 2% target.