UK manufacturers feel the pay pressure from rising inflation

[LONDON] British manufacturers have offered higher pay deals to staff but many others are holding off on settlements as they monitor fast-rising inflation and get ready for higher minimum wages and a tax hike, industry group MakeUK said on Monday.

Only 2 per cent of the companies which took part in a MakeUK survey have frozen pay this year, way down from around a third of them a year ago.

Most pay increases ranged between 2 per cent and 3 per cent, below the recent pace of inflation, but went as high as 14 per cent in some cases.

However, around 45 per cent of companies said they had yet to agree a pay deal, up from about 30 per cent this time last year.

The Bank of England is keeping a close eye on the impact of rising inflation on pay deals, something it fears could lead to longer-term inflationary pressures. The BoE thinks inflation will hit a 30-year high of 6 per cent in April when higher social security contributions are due to kick in.

Verity Davidge, the association's director of policy, said the outlook for pay among manufacturers compared starkly with a year earlier, when many companies froze or deferred deals as the country headed back into lockdown due to the pandemic.

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Some companies felt the need to reward staff and others were trying to attract and retain key skills, Davidge said.

"As a result, the picture this year for manufacturers agreeing pay settlements is far more complex," she said.

The survey of 152 firms was carried out in December.

REUTERS