Jessica Fino 14 Nov 2017 01:36pm

UK faces five years of slow wage growth

UK wage growth is predicted to remain slow during the next five years as the country faces the worst decade for productivity growth in decades

A report by the Resolution Foundation warned that weekly pay will be almost £25 lower in 2022 than previously expected, still £22.70 below the pre-crisis peak.

The think-tank said this meant that UK pay packets would still not have recovered to their pre-recession peak 15 years after the start of the financial crisis.

Matt Whittaker, chief economist at the Resolution Foundation, said this had been the worst decade for productivity growth since the start of the 19th century, and that Budget day was “set to bring bad news about what we have the potential to produce as a country.”

Meanwhile, business management consultancy ECA International said that UK employees were expected to receive a 0.2% real-terms salary increase in 2018, 15 times less than their European peers.

While the forecast nominal salary is expected to increase by 2.8%, this is just 0.2% above the 2.6% inflation rate. The 0.2% pay rise is equivalent to £4.41 a month for the average worker, before tax.

Only employees in Hungary, Portugal and Ukraine are likely to be worse off than those in the UK.

ECA said that next year’s pay rise predictions were in line with what happened this year, when employees received a disappointing 0.1% real salary increase due to a jump in inflation caused by sterling’s fall in value.

Steven Kilfedder, production manager at ECA International, said, “Productivity growth in the UK has remained low in recent years so employers have not been able to offer the level of salary increases that they have been able to in the past.

“This, combined with higher inflation, which is expected to be 2.6% next year, has caused something of a pay crunch for UK workers.”

The news followed Monday’s reports that employees were not pushing for more money despite slow wage growth and low unemployment.

According to a survey of 2,000 employers by the Chartered Institute for Personnel and Development (CIPD), only a quarter of those in the UK private sector felt pressure to increase wages, and 38% reported being under no pressure.