- Reuters/Denis Balibouse
- Bank of England agents’ survey shows that real wages will grow by 3.1% in 2018.
- That’s well ahead of 2017’s 2.6% growth, and would mark a return to real wage growth.
- Rising inflation since the Brexit vote has squeezed the pockets of the British people.
LONDON – Wage growth in the UK is set to pick over the course of 2018, with overall incomes growing for the first time since early 2017, the Bank of England’s monthly agents’ survey shows.
The agents’ summary of business conditions, which polls the central bank’s operatives in the UK’s regions to create a holistic picture of what’s going on in the economy, showed that businesses expect wage growth to increase to 3.1% in 2018, up from 2.6% last year.
With inflation expected to fall from its current level of 3%, that means Brits are set to see their real wages grow, albeit slowly, over the course of the year – a condition that has been largely absent for workers since the vote to leave the EU in June 2016.
“The survey indicated that companies expected an average pay settlement rate of 3.1% in 2018, compared with 2.6% in 2017,” the Bank of England said.
“The 2017 outturn was higher than the 2.2% that had been expected in last year’s survey, reflecting larger settlements across a broad range of sectors.
“The increases in pay settlements in 2018 are also expected to be broad-based, with only the construction sector expecting pay settlements in 2018 to be the same as in 2017.
“Total labour cost growth continued to pick up, largely due to a combination of recruitment difficulties, the rising cost of living and the increase in the National Living Wage,” the survey added.
Here’s the Bank of England’s chart (the pale blue diamond is where wage growth is expected by the end of the year):
- Bank of England
Between 2008 and 2014 inflation outstripped pay, causing real wages to fall. Although this was reversed in 2015 and 2016, last year saw a renewed fall in real wages following the Brexit referendum and drop in the value of the pound. Inflation, which was at 0.5% in June 2016, rose to 3.1% in November 2017. Meanwhile, wage growth was 2.4% in October 2017.
Falling real wages come at a time when unemployment in Britain is at a near record low, with the unemployment rate at just 4.3%.