LONDON (Reuters) – British employers scaled back the annual pay settlements they offered to staff at the start of 2024, a survey showed on Wednesday, in a move likely to reassure the Bank of England that underlying inflation pressures are starting to ease.
Human resources data company XpertHR said that the median pay settlement during the three months to the end of January dropped to 5.1% from 6% during the October to December period, based on 57 pay awards covering more than 180,000 employees.
In January alone, pay settlement averaged 5%.
“Around half of employee groups are receiving settlements worth less than their previous award, where high awards were provided to account for the rising cost of living affecting UK employees at the end of 2022 and throughout 2023,” said Sheila Attwood, senior content manager at XpertHR.
The fall in pay settlements alongside recent sharp drops in the headline rate of consumer price inflation matches comments on Tuesday from Bank of England Deputy Governor Ben Broadbent, who said he thought recent very rapid wage growth reflected high inflation more than underlying shortages.
Official data showed average earnings, excluding bonuses, rose by an annual 6.2% in the fourth quarter of last year – less than in the middle of 2023 but roughly double the pay growth which the BoE thinks is compatible with keeping consumer price inflation at its 2% target.
CPI peaked at 11.1% in October 2022 and was 4% in December and January. The BoE expects it to fall to its 2% target in the second quarter of 2024, but fears it will rise back towards 3% later in the year as the effect of lower energy prices fades.
(Reporting by David Milliken, editing by Andy Bruce)
