British Employers Plan Smaller Pay Rises for 2024: CIPD
LONDON, Feb 12 – British employers expect to offer smaller pay raises over the next year compared to earlier predictions, marking the first drop in nearly four years. This decline reflects a reduced willingness to tolerate higher labor costs, according to a recent survey.
The Chartered Institute of Personnel and Development (CIPD) conducted a poll of 2,006 employers from Jan. 2 to Jan. 22, revealing that British employers anticipate a 4% increase in basic pay over the next 12 months. This is a drop from the previously expected rise of 5% in 2023 and late 2022. The last time such a decrease occurred was during the early stages of the COVID-19 pandemic in 2020.
CIPD economist Jon Boys described the survey results as a significant moment in the UK labor market. Additionally, the figures are likely to boost confidence among Bank of England policymakers. The bank believes that with the recent declines in energy prices, domestic inflation pressures are easing, and this could lead to lower interest rates later this year.
Pay rises in the private sector and non-profit organizations aligned with the median forecast, while public sector employers planned to raise pay by 3%. Furthermore, public-sector employers are expected to recruit staff at the slowest pace since 2019.
Among all the employers surveyed, the proportion indicating that they would fund pay rises through reduced staffing increased from 12% to 21%. Meanwhile, the proportion willing to absorb higher wage costs in profit margins or general overheads decreased from 50% to 37%.
The Bank of England’s survey indicated that employers expected a 5.2% pay increase throughout this year. However, the central bank has started considering interest rate cuts from the current 16-year high of 5.25%. The risk of inflation falling below the bank’s target of 2% is deemed temporary due to annual wage growth over 6%.
The survey results shed light on the changing dynamics of the UK labor market. As employers show less willingness to tolerate higher labor costs, the smaller pay rises expected in 2024 may provide relief to the Bank of England and contribute to a potential decrease in interest rates later this year.
Overall, this shift in expected pay raises reflects the economic landscape and could impact employment decisions across various industries. As the UK evaluates the implications of these findings, it remains to be seen how employers and employees will navigate these changing circumstances in the months ahead.
