Expectations of wage growth in UK businesses have declined to their lowest point in nearly two years, according to a Bank of England poll.
Chief Financial Officers predicted wages could rise by 4.7 per cent in the next year, according to a survey conducted by the central bank in March.
This figure is down from the predicted increase of 4.9 per cent forecast in February and the lowest since spring 2022.
Over the past two years, businesses have expected pay to rise by more than 5 percent. The BoE has cited strong pay growth expectations as an indicator of persistent domestic price pressures, which it wants to see easing before considering interest rate cuts.
With services inflation, heavily affected by trends in pay, rising at an annual rate of 6.1 per cent in February and headline inflation at3.4 per cent, the lowest since 2021, the dip in wage growth projections could boost the likelihood of the BoE commencing rate reductions from a 16 year high of 5.25.
Alongside easing wage growth for the year up to March it fell to 6.1 per cent from 6.5 per cent, but businesses continued to report a better outlook for price growth.
As an attempt to boost households hit by the cost of living crisis, survey respondents said they expect to lift prices by 3.7 per cent in the year ahead, down from February at 4.1 per cent and the lowest since September 2021.
CFO’s followed a similar pattern saying they raised their prices by an annual rate of 4.8 percent in March, declining from 5.4 percent in the previous month.
Derek Mackenzie, CEO of Investigo, part of The IN Group, said, “While pay plays an important role for staff, it is crucial that organisations understand there is much more to a role than pay alone – staff want purpose.
“In order to stand out from other employers, businesses must offer areas for career progression, flexible workplace policies and inclusive and supportive cultures to make staff feel welcome and valued. In turn, this will help attract and retain employees who will be aligned with the business’s values, enhancing productivity.
“Organisations must continue to prioritise their employees regardless of external market forces, unlocking the power of people so that both the business and staff can thrive.”
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