Danny McCance 15 May 2017 01:16pm

UK set for lowest pay rises in more than three years

UK wages will grow by only 1% in the year ahead, at less than half the current rate of inflation

Employers are planning to give median pay increases in the 12 months to March 2018 of just 1%, compared to 1.5% in the previous quarter, according to the Chartered Institute of Personnel and Development (CIPD).

This represents a three-and-a-half-year low, the survey of more than 1,000 employers revealed.

“A significant proportion of UK workers will see a fall in their living standards as the year progresses, due to a slowdown in basic pay and expectations of inflation increases over the next few months," Gerwyn Davies, labour market adviser at the CIPD said.

The most recent Office for National Statistics (ONS) figures recorded consumer inflation at 2.3% in March, up from 1.9% in January.

“The weak pay data is no surprise given the continued weak productivity growth in the UK," Davies continued.

“However, this is being exacerbated by many employers’ passive attitude towards workforce development and training, despite reporting hard-to-fill vacancies.

“At the same time, private sector employers are proving stubbornly unresponsive to labour market changes that should, in theory, act to increase wages, such as the number of unfilled vacancies," Davies added.

More than a fifth of private sector respondents (21%) who will not offer pay increases above 2%, or who will freeze pay increases, blame auto-enrolment for the lack of generosity.

“The data suggests that the introduction and increase of various labour costs, such as the government’s auto-enrolment scheme and the apprenticeship levy may be part of the explanation," said Davies.

Dia Chakravarty, political director at the TaxPayers' Alliance said, "An average household now spends a third of its income on taxes. So the easiest way to increase people's spending power is to cut taxes and leave more money in the pockets of those who earned it.

"Coupled with that, policies promoting greater competition and less interference in the market are the only sensible way to help taxpayers cope with the modest rise in median pay." 

In March, analysis from the Resolution Foundation suggested that UK families face the worst decade for wage growth since the Napoleonic wars.