LONDON: British workers are in line for their biggest pay rises since 2008 this year as a higher minimum wage kicks in, according to a Bank of England survey that is likely to fuel concerns among its policymakers over inflationary pressures.
Last week the central bank said interest rates would probably need to rise sooner and by somewhat more than it had previously thought to control above-target inflation.
Wage growth in Britain has been lacklustre since the financial crisis.
But with unemployment at its lowest since 1975 and European Union immigrants less keen to come to Britain ahead of its departure from the bloc, the BoE thinks pay is beginning to pick up.
Firms plan to offer average pay settlements of 3.1 per cent — the highest since 2008 — compared with 2.6pc last year, the BoE said in an annual survey published on Wednesday. The biggest planned rises were in consumer services, where large numbers of staff are paid close to the minimum wage.
Britain’s minimum wage for those aged 25 and over is due to rise by 4.4pc in April to 7.83 pounds ($10.85) an hour, while pay for some younger workers will rise by over 5pc.
Higher-paid staff are less likely to benefit, with businesses trying to limit basic increases in management pay to 1-2pc to keep down overall wage bills, the BoE said. Businesses also reported cost pressures from higher mandatory pension contributions, increased inflation, a lack of foreign workers and difficulty recruiting and retaining staff.
“Expectations that the Bank of England will raise interest rates in May will likely be fuelled by their regional agents reporting a pick-up in companies’ expected average pay settlements,” economist Howard Archer at consultants EY Item Club said.
Published in Dawn, February 15th, 2018