UK firms plan biggest pay rises since 2008, boosting rate hike case
(Adds detail to report)
By David Milliken
LONDON, Feb 14 (Reuters) - British workers are in line for
their biggest pay rises since 2008 this year as a higher minimum
wage kicks in, according to a Bank of England survey that is
likely to fuel concerns among its policymakers' over
Last week the central bank said interest rates would
probably need to rise sooner and by somewhat more than it had
previously thought to control above-target inflation.
Wage growth in Britain has been lacklustre since the
But with unemployment at its lowest since 1975 and European
Union immigrants less keen to come to Britain ahead of its
departure from the bloc, the BoE thinks pay is beginning to pick
Firms plan to offer average pay settlements of 3.1 percent -
the highest since 2008 - compared with 2.6 percent last year,
the BoE said in an annual survey published on Wednesday.
The biggest planned rises were in consumer services, where
large numbers of staff are paid close to the minimum wage.
Britain's minimum wage for those aged 25 and over is due to
rise by 4.4 percent in April to 7.83 pounds ($10.85) an hour,
while pay for some younger workers will rise by over 5 percent.
Higher-paid staff are less likely to benefit, with
businesses trying to limit basic increases in management pay to
1-2 percent to keep down overall wage bills, the BoE said.
Businesses also reported cost pressures from higher
mandatory pension contributions, increased inflation, a lack of
foreign workers and difficulty recruiting and retaining staff.
"Expectations that the Bank of England will raise interest
rates in May will likely be fuelled by their regional agents
reporting a pick-up in companies' expected average pay
settlements," economist Howard Archer at consultants EY Item
British inflation hit its highest in more than five years in
late 2017, due to the pound's tumble after June 2016's Brexit
vote pushing up the cost of imports. Even as this effect fades,
the BoE expects inflation to fall only slowly as domestic
A Reuters poll on Wednesday showed most economists expect
the BoE to raise rates by a quarter of a percentage point to
0.75 percent in May, and financial markets see a roughly 50
percent chance of a further rise before the end of 2018.
Last week the BoE forecast annual pay growth would reach 3
percent by the end of 2018, up from 2.5 percent in the year to
The BoE has been overly optimistic about pay before. But it
said on Wednesday that pay deals last year were bigger than
firms had predicted in its survey a year ago. The survey was
based on replies from 368 businesses employing 845,000 staff.
($1 = 0.7213 pounds)
(Reporting by David Milliken, editing by Andy Bruce and John
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