Wages are growing faster than expected and employment in the UK remains close to an 11 year high. According to data from the Office of National Statistics average weekly earnings are rising at 2.8% whilst most analysts had forecast a slightly more moderate 2.6%.
In a recent Financial Times interview Sebastian Burnside, senior economist at the Royal Bank of Scotland, said that “overall the data suggests that the UK Labour Market has been unaffected by the Brexit vote”. Meanwhile David Freeman from the ONS added that “the rate at which pay is increasing continues to pick-up in cash terms, helped by the employment rate remaining at an historic high”. Therefore it appears that British workers could find themselves with growing pay packets this year, as low unemployment combined with strong global economic growth drive up wages.
Income growth has been sluggish in recent years, with analysts blaming factors including weak productivity growth, memories of the recession, and intense foreign competition in industries such as manufacturing. But that could now be over with the Daily Telegraph reporting that Adam Slater from Oxford Economics predicts UK wage inflation will rise from 2.4% in 2016 to 2.9p% in 2017. He noted that workers are increasingly prepared to quit their job without first securing a better position, indicating a high degree of confidence that other work is available and attainable.
Figures from the Office for National Statistics also show that there are almost 750,000 vacancies available, one of the highest numbers on record - and at a time of low unemployment, that may also mean employers are under pressure to pay more to gain and keep the staff they need.
Unemployment is at an 11-year low (4.8%), and the employment rate of 74.4% is almost the highest on record, putting upward pressure on pay. The Bank of England also anticipates an increase in salaries, though it will in part be driven by households demanding more pay to maintain living standards at a time of rising prices. According to Mark Carney at the Bank of England “Growth in the total labour costs had remained moderate… most pay awards are in the 1% to 3% range… inflation may cause some significant upward pressure on pay growth in 2017”.
With these facts in mind, employers who want to successfully appoint the required talent to drive growth and take advantage of the current economic confidence will need to be realistic regarding salary and remuneration as well as pro-active and imaginative in their future recruitment campaigns. Having a strong, transparent and candid relationship with a leading recruiter in the specific functional area and/or sector in which they are recruiting will also help ensure the best candidate is recruited.
Berwick Partners leads the way in recruiting senior leadership positions across both the private and public sectors regionally and nationally, supporting organisations in making appointments which have a critical impact upon their business’ future and success.
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