UK pay deals stay low even as inflation starts to bite

[LONDON] British workers are continuing to get subdued pay settlements even as inflation starts to pick up, a report from pay analysts XpertHR said on Thursday.

The median pay award in the three months to the end of 2016 was 1.9 per cent, only narrowly ahead of a 1.6 per cent rise in consumer prices in December.

Many economists expect inflation will hit 3 per cent later this year, eroding the spending power of consumers who have helped Britain's economy cope, so far, with the referendum decision last year to leave the European Union.

"While inflation is beginning to rise, this has yet to feed into pay award levels," Sheila Attwood, pay and benefits editor at XpertHR, said.

"But there is no doubt that as the year progresses employers will be feeling the pressure from employees to provide a real-terms pay increase."

For 2016 as a whole, the median pay award was also 1.9 per cent, down slightly from 2 per cent in 2015.

In the private sector the average pay award was 2 per cent, while public sector pay rose one per cent in line with government policy on capping wages for civil servants, XpertHR said.

Only one in six workers got a higher increase than they received at their last pay review.

XpertHR said that the highest pay increases tended to be linked to the introduction of the national living wage in April 2016 of £7.20 (S$12.78) for workers aged 25 and above.

Construction workers enjoyed the highest pay awards of 2.5 per cent, reflecting a shortage of skilled workers in the sector.

A drop in sterling since the Brexit vote is expected to add to the upward pressure on prices in 2017.

REUTERS