Published : 2 years ago, on 22/03/2023

By Suban Abdulla

LONDON (Reuters) – British employers expect pay settlements over 2023 as a whole to average 5%, down slightly from the 32-year high of 6% recorded during the three months to the end of February, new industry data showed on Wednesday.

“Our forecast indicates that pay awards may have reached their peak and will settle throughout the course of the year,” said Sheila Attwood, senior content manager at XpertHR.

The forecast is based on a survey of 266 organisations which employ a total of more than 300,000 staff.

If pay growth has peaked, this will be welcome news for the Bank of England, which is concerned that double-digit inflation will be harder to tame if pay awards keep growing.

However, nearly all employers noted pressure to increase pay deals, with the majority citing inflation, labour shortages and the need to offer competitive pay.

Pay awards in the three months to the end of February averaged 6%, unchanged from the three months to the end of January and the joint highest since September 1991, according to XpertHR’s analysis of 198 pay awards covering 450,000 staff.

XpertHR said the rising national living wage, which will increase by 9.7% next month for people aged 23 and over, was also putting upward pressure on pay deals.

Pay awards remain well below the rate of inflation. Consumer price inflation has fallen slightly since it hit a 42-year of 11.1% in October last year, and was 10.1% in January.

The country’s budget forecaster, the Office for Budget Responsibility (OBR), last week forecast inflation would fall to 2.9% by the end of 2023, but added Britain remained on track for a record fall in living standards over the two years to March 2024.

February inflation data is due at 0700 GMT on Wednesday and is forecast to show a fall to 9.9%. A narrow majority of economists polled by Reuters expect the BoE to raise its main interest rate on Thursday to 4.25% from 4%.

(Reporting by Suban Abdulla; editing by David Milliken)