UK employers see pay growth slowing to 5% in 2024: XpertHR

By David Milliken

LONDON (Reuters) – British employers expect to give staff average pay rises of 5% during the 12 months to the end of September 2024, down from 6% over the past year, a survey showed on Wednesday in a further sign that Britain’s labour market is softening.

“After a year of strong pay growth driven by a tight labour market, signs of a cooling market are beginning to emerge, influenced by a sustained period of higher interest rates,” said Sheila Attwood, senior content manager at XpertHR.

The Bank of England is keeping a close eye on the outlook for pay, as it considers whether its string of rate rises, which began in December 2021, has now run its course.

BoE Chief Economist Huw Pill said on Monday he was concerned domestic pressures such as strong pay growth could cause inflation to level off above the BoE’s 2% target, even if inflation fell due to more stable energy prices.

Before the pandemic, when inflation was mostly near target, average earnings typically grew at an annual rate of 3-4%, and median pay settlements were usually slightly below that.

XpertHR said the median pay award in the 12 months to the end of September was 6%, up from 4% in the 12 months to September 2022, reflecting a sharp rise in inflation.

The median pay award in the public sector was 6.1%, the highest recorded since 1992 and just above the median 6.0% seen in the private sector.

Official data due later on Wednesday is likely to show consumer prices rose 6.6% in the year to September 2023, according to a Reuters poll of economists, down from a peak of 11.1% in October 2022.

XpertHR said the median pay settlement in the three months to September was 5.4%, up from 5% in the three months to August.

The September data was based on 66 pay awards covering nearly 1 million employees, while the year-ahead forecast was based on views from 201 organisations that represent nearly 600,000 employees.

(Reporting by David Milliken, editing by Andy Bruce)