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UK set for pay rise, says BCC and Indeed

2nd August 2018

One in two businesses (50%) are set to grant staff pay rises of over 2% in the next year, according to a new survey by leading business organisation British Chambers of Commerce (BCC) and online recruitment company Indeed.

The survey, of over 1,000 businesses of all sizes and sectors, reveals that 6% of firms will increase pay by more than 5%, 32% by 2-5%, 12% in line with consumer price inflation, and 18% by 1-2%.

Only 2% of firms say that they expect to decrease salaries – set against a backdrop of increasing upfront business costs.

When looking at increases in the National Living Wage over the next three years, just over a third (37%) say that they will respond by raising prices of products and services, and nearly a quarter (23%) say that they will take lower margins and profits. 16% say that they will increase investment in automation, and the same number will recruit those on flexible contracts, such as the self-employed.

The results show that, despite increasing economic uncertainty, a fall in the exchange rate, and numerous upfront costs incurred over the last couple of years, firms remain committed to giving their staff a pay rise. However, at the next Budget the government needs to reduce the growing cost burden on business and make it easier for firms to grow, hire, and retain staff.

Jane Gratton, BCC Head of Business Environment and Skills Policy, said:

“This is good news for employees who have felt the squeeze in their pay packets in recent months. People and skills are the most important asset for businesses, and so employers will want to pay a great wage that motivates and retains their team. But the cost of wage increases has to be offset in some way, for example by greater productivity, lower costs or higher prices.

“Our survey work has shown that growing and pervasive skills shortages are making it harder than ever for firms to fill job vacancies – so it is little surprise that they are pulling out all the stops to keep hold of the ones they have.  But the rising cumulative cost-burden of employment, together with business rates and other charges, increases pressure on firms to raise prices and automate. To avoid future job losses, the government must avoid any additional costs on business and help firms to boost productivity, for example by making it easier for firms to use the apprenticeship levy to upskill their staff.”

Tara Sinclair, senior fellow and economist at global job site Indeed, added:

“It would be understandable if workers had felt a little out of pocket so far this year as wage growth in the UK remained stubbornly low. Record employment has also added pressure on employers who must compete in a tight labour market and do so usually by offering bumper pay packets.

“These figures suggest brighter times are ahead for workers who after seeing their wage growth barely exceed inflation could receive a meaningful pay rise. Couple these findings with the recent public sector pay hikes and it appears organisations are feeling more confident despite continued uncertainty. The question now is will they raise wages enough to continue to outpace price rises?”