LONDON (MNI) – The median UK pay deal in the first quarter of this
year was 3%, with the gap between manufacturing and services deals
having closed, according to pay specialists IdsPay.co.uk.
With the public sector still subject to a pay freeze, there will be
downward pressure in April when most of the public sector pay deals come
into force. The early pay deals for April in the IdsPay.co.uk survey,
however, only showed the median nudging down to 2.9% with April private
sector deals similar to those in the first quarter.
The IDS survey put both the median Q1 manufacturing and services
pay deals at 3.0%, with the pattern of manufacturing pay outstripping
that of services during the recovery coming to an end.
The financial and retail sector pay deals were typically a little
below 3%, while transport and media saw above 3% deals.
It is hard to know what level of pay deals is currently compatible
with the Bank of England Monetary Policy Committee’s 2.0% inflation
target. The old rule of thumb suggested around 4% was compatible, based
on the 2.0% target plus the long run trend rate of 2.0% productivity
growth, but recent official data has shown historically very weak
productivity growth.
The April Bank of England Monetary Policy Committee minutes warned
of rising unit labour costs despite labour market slack.
“Labour market slack was acting to restrain nominal wage growth,
which was running at rates well below pre-crisis norms” but “labour
productivity growth had been weak for some time, so that a reduction in
unit labour cost growth had been much less evident,” the minutes said.
An alternative recent pay survey, from XpertHR, showed Q1 and April
pay deals running softer than IDS found.
XpertHR said UK pay deals moved higher in the first quarter,
rising to 2.6% from last year’s average of 2.0%, while the median pay
deal for April dropped back to 2%.
–London newsroom: 0044-7862-7491 email: drobinson@marketnews.com
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