LONDON – British employers’ pay award increases are on course to hit a median of 6% in January, the highest reading in over 30 years, provisional data from human resources information provider XpertHR showed on Friday.
The figures, provided to Reuters, followed Bank of England Deputy Governor Ben Broadbent’s warning on Thursday that settlements at this level were inconsistent with the central bank’s 2% target.
The BoE is watching pay deals data for signs that the recent surge in inflation will have a lasting impact on wage growth, which could result in more persistent inflation pressure in the years ahead, potentially preventing the central bank from cutting interest rates.
Based on 15 deals from major employers in January, XpertHR said the median whole economy pay award had risen to 6%, which would be the highest reading since September 1991. December and November both saw readings of 5%.
XpertHR added that the settlements data were finely balanced and the final data could be revised back down to show a 5% increase.
After raising interest rates to 4% on Thursday, BoE Governor Andrew Bailey said officials had been surprised by the strength of private sector wage settlements, although he added that there were signs this might ease later in the year.
Even average pay settlements of 6% would leave employees facing a sizeable hit to their incomes after taking into account inflation, which peaked at 11.1% in October.
Expectations for inflation among the British public have declined in recent months, meaning the prospect of a damaging wage-price spiral appears to have reduced.