Despite the economic squeeze, UK companies are planning to lift wages this year at the fastest rate in a decade.
But, pay rises are not expected to match last winter’s double-digit inflation rates.
Research from the Chartered Institute of Personnel Development (CIPD) found that 55% of recruiters planned to lift base or variable pay this year as they struggle to hire and retain staff in Britain’s tight labour market.
Private sector firms expect, on average, to lift wages by 5% this year, CIPD say, as companies try to attract new staff…. and retain those they already have.
These pay increases could add to inflationary pressures – something that would concern the Bank of England as it tries to control the cost of living. Around 57% of the firms planning pay rises expect to pay for it through raising prices, rather than lowering profits and absorbing the costs.
The opposite was true 12 months ago, CPID say, suggesting that the tight labour market will increasingly feed through into price rises for organisations’ goods and services.
Jon Boys, senior labour market economist at CIPD, says: “Skills and labour remain scarce in the face of a labour market which continues to be surprisingly buoyant given the economic backdrop of rising inflation and the associated cost-of-living crisis.
“It’s positive to see many employers taking steps to tackle skills shortages by upskilling existing staff and hiring apprentices. However, the UK Government could provide much-needed support by making the Apprenticeship Levy more flexible, to boost employer investment in training and reverse the decline in apprenticeship starts we’ve seen in recent years.