In the most recent data provided by the Office for National Statistics (ONS), it has been revealed that average wages are on the rise, outpacing inflation for both public and private sector workers. Between October and December, pay increased by 3.4% when considering the pace of price rises compared to the same period a year prior. Despite this positive news, the UK’s unemployment rate remained steady at 4.4%, with caution advised regarding the accuracy of these job figures due to low survey response rates.
Businesses have expressed concerns over potential impacts on pay rises and investments, citing increased National Insurance contributions, rising minimum wages, and reduced business rates relief as key factors. When excluding bonuses, the ONS reported a 5.9% annual pay growth from October to December, up from the previous figure of 5.6%. Private sector earnings grew by 6.2% while the public sector saw a growth of 4.7%.
Experts predict a trend of decreasing pay growth in the foreseeable future, with inflation also expected to rise due to escalating energy and water costs. Despite a recent interest rate cut by the Bank of England, policymakers are not likely to make adjustments based on the slight increase in private sector wages. Concerns linger over potential negative impacts on hiring intentions and investments as the government implements higher costs for businesses starting in April.
The British Chambers of Commerce emphasized the importance of minimizing costs for businesses and ensuring access to skilled workforces to avoid damage to employment opportunities. With potential price hikes by companies to cover increased costs looming, there is a risk of further inflationary pressures that could strain household budgets. While total estimated vacancies are down compared to pre-Covid levels, the number of UK workers on payrolls increased slightly during January. As the year progresses, there is a sense of uncertainty in the job market, awaiting the effects of upcoming changes and legislation on employment
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