British wage growth likely to disappoint in 2016: industry body

DEC 30, 20157:18 PM

[LONDON] British wage growth next year is likely to fall far short of the expectations of the Bank of England (BoE) and government as employers hold back on pay rises in the face of growing costs, an industry body said on Wednesday.

The Chartered Institute of Personnel Development (CIPD) said pay growth will stay stuck at about 2 per cent for most or all of 2016, well below forecasts of about 3.5 per cent from the BoE and Office for Budget Responsibility.

Wage growth is an important determinant in the outlook for interest rates, with BoE policymakers judging when to raise rates from their record low 0.5 per cent.

Some employers are worried about the cost of a new higher minimum wage, especially in retail, hospitality and social care, rising pension costs for small firms and a levy on large companies to train apprentices, the CIPD said.

"With inflation close to zero, some employers will try to manage these costs by restricting pay rises for their better-paid employees," CIPD chief economist, Mark Beatson, said.

Workers' pay in Britain grew at a slower-than-expected pace in the three months to October, suggesting the Bank of England will take even longer to raise interest rates from the record low in place for nearly seven years.

While pay has risen strongly in some sectors, including construction, surveys of employers have shown scant sign that pay deals are likely to increase much soon.

Most employers believe they have a choice of suitable candidates for most positions, said the CIPD, which has 140,000 members worldwide and regularly produces research into Britain's labour market.

"With record levels of net migration into the UK increasing the supply of labour, it doesn't look like we're going to see a skills crunch any time soon," Mr Beatson said.

REUTERS