By William Schomberg
LONDON – Pay awards for British private-sector workers are set to return to their pre-pandemic size as employers compete for staff, according to a survey which will feed into the Bank of England’s thinking about when to raise interest rates.
Private-sector employers predicted pay award increases would average 2.5% in the 12 months to the end of August 2022 as the economy recovers from the shock of coronavirus lockdowns, human resources data provider XpertHR said on Thursday.
That compared with awards averaging 1.2% in the first three months of this year and 2.0% in the second quarter, reflecting the shortage of staff faced by many employers, XpertHR said.
Rich countries around the world are facing similar problems but the lack of candidates for truck drivers, abattoir workers, chefs and other positions in Britain has been aggravated by Brexit which led to restrictions on workers from the European Union.
“Driving these increases will be a need to respond to the market with recruitment and retention difficulties pushing wages higher,” Sheila Attwood, XpertHR pay and benefits editor, said.
“However, while many organisations also believe that some economic recovery will enable them to award higher increases at their annual pay review, others are still concerned about business volumes and are likely to remain cautious.”
The BoE is watching for signs of inflation pressure building in the economy.
Governor Andrew Bailey said on Sunday that the central bank “will have to act and must do so if we see a risk, particularly to medium-term inflation and to medium-term inflation expectations.”
The BoE is due to announce its next policy decision on Nov. 4 when investors expect it to hike interest rates for the first rate time since the pandemic.
Annual pay awards typically run well below the headline rate of pay growth in Britain, which includes pay rises due to promotions and shifts in the structure of the workforce.
Britain’s Office for National Statistics says the current annual growth in average weekly earnings – 7.2% in the three months to August – is inflated by workers returning from furlough, when pay was reduced, as well as greater job losses among lower-paid workers than higher-paid staff.