British wages are growing at the fastest pace on record and faster than most other major economies, adding to pressure on the Bank of England to raise interest rates further.
Official data showed that nominal regular wages, excluding bonuses, rose at an annual rate of 7.8% in the three months to June, the fastest pace since records began in 2001 and faster than growth in the United States and the euro zone. Much faster. An increase of just over 4%.
Markets see both the Fed and ECB rates at or near peaks, but they expect the Bank of England to raise rates by another half percentage point to 5.75% by the end of the year.
While tightness in Britain’s labor market is easing, demand for workers still far outstrips supply, with more than 1 million vacancies in the three months to July, according to official figures.
That has helped push up wages in many industries, and the impact of higher interest rates is only beginning to be felt in a slowdown in construction wage growth.
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retail
7.7%
Retail regular wage growth for 3 months through June, annual percent change
The UK’s largest retail employer predicted labor costs would remain a challenge even as prices for other inputs fell.
“Simply put, you just need to distinguish between structural inflation and transitory inflation,” said Tesco chief executive Ken Murphy. “We’re seeing structural wage increases in the system through our producers, our supply chain and our own retail business.”
Normal wages in retail trade rose at an annual rate of 7.7% in the three months to June, up from 6% in the previous quarter, according to the Office for National Statistics.
As in other industries, wages have risen due to labor shortages due to Brexit and the impact of the new crown epidemic.
Nadine Houghton, organizer of the GMB union, said: “Clearly, as people reassess what they are prepared to do, the impact of Brexit and migrant labour, and what the post-COVID world looks like is also being affected.”
Two supermarket companies, Aldi and Lidl, have set higher wages to attract workers. That puts pressure on other retailers to follow suit.
the hospitality
6.5%
Routine Wage Increases in Accommodation and Food Services for 3 Months Ending June, Annual Percent Change
Faced with high vacancy rates – there are currently 124,000 vacancies in the industry, according to the Office for National Statistics – hoteliers have been forced to raise wages sharply to retain staff.
The government’s decision to raise the hourly minimum wage by almost 10% to £10.42 has also added to wage bills for restaurants, pubs and hotels.
According to the ONS, wages in the accommodation and food services sector rose at an annual rate of 6.5% in the three months to June, up from 4.4% in the previous three months.
Jonathan Neame, chief executive of pub chain and brewer Shepherd Neame, said the rise in the minimum wage was “the main driver” of wage growth in the sector.
But Baton Berisha, chief executive of upscale restaurant group Wolseley, said: “The labor shortage has caused wages to rise dramatically and since Brexit we’ve had fewer people working in hospitality overall, so everyone has to pay more. .”
manufacturing
8.2%
Manufacturing routine wage growth for 3 months through June, annual percent change
A severe shortage of manual workers has forced UK manufacturers to raise wages, adding to pressure on employers who have had to spend more on energy and components over the past year.
Factory owners say they are also grappling with an aging workforce, the loss of EU workers after Brexit and the fallout from the coronavirus pandemic.
“Companies are doing whatever it takes to maintain their skills base,” said Verity Davidge, policy director at industry group Make UK.
According to the ONS, there were 70,000 vacancies in the industry in the three months to July, while wages grew at an annual rate of 8.2%, up from 6.4% in the previous three months
Salaries for some professional jobs have soared even higher. For example, according to a June survey of 236 businesses by industry body Make UK, annual wages for sheet metal workers rose by 35%, with 19% of employers waiting six to 12 months to fill vacancies.
Increases in the minimum wage and a cost-of-living crisis have also put pressure on manufacturers to raise wages for low-wage factory workers.
put up
5.8%
Construction Routine Wage Growth 3 Months Ending June, Annual Percent Change
Rising interest rates and cuts in public spending are dampening confidence in the construction sector and starting to limit wage growth.
Wages rose at an annual rate of 5.8% in the three months to June, down from 6.5% in the previous quarter.
Homebuilders have been hit by a drop in home sales due to rising mortgage rates and the end of the government’s “help to buy” scheme. The industry has been hit by the government’s delay in releasing a national infrastructure and construction plan, as well as its decision to stop work on parts of the controversial high-speed rail project HS2.
Despite this, the Construction Industry Training Council found that “the industry’s need to recruit and retain talent has arguably never been greater”.
“From 2021 to the beginning of this year . . . there is high turnover, with a lot of organizations seeing a lot of turnover,” said Mark Reynolds, chief executive of consultancy and construction group Mace. “That’s the main reason we’ve had a huge increase in wages.” ”
He added that wage growth was “flattening out” due to market conditions.
Financial Services
9.4%
Routine wage growth in financial and business services, annual percent change, 3 months ended June
Financial services firms have been the beneficiaries of the windfall as interest rates rise, with commercial banks among the biggest winners.
“Banks, especially the big ones, have made a lot of money since interest rates started going up,” said Mark Mullen, chief executive of digital lender Atom Bank. “Frankly, when the profits roll in, the bankers benefit.”
But like other industries, wage growth has been driven by persistently high inflation. Official data showed wages in financial and business services rose at an annual rate of 9.4% in the three months to June, up from 8.8% in the previous quarter.
Staff costs at Lloyds, NatWest, Barclays and HSBC are up about 4% year-on-year in the first half of 2023.
“We’re seeing costs going up in every area,” Charlie Nunn, chief executive of Lloyds Bank, said on an earnings call in July. “We’re certainly seeing that in wages, it’s is a significant portion of our overall operating expenses, [representing] About 40% of the total. ”
The company is under pressure from unions to give another pay raise mid-year. Commercial banks including Lloyds, NatWest and Santander are raising wages for lower-level staff by 4% to 5% in 2022, with some offering an extra one-time sexual payment.
However, there are signs that wage growth for the industry’s highest-paying jobs may be slowing. M&A activity at investment banks has been relatively anemic this year, leading to thousands of layoffs and reduced bonuses, and that’s likely to continue.
health department
6.8%
Routine wage growth in health and social work services for 3 months to June, annual percent change
The biggest strike action in decades against Britain’s taxpayer-funded health care sector has been underway since December, as workers have struggled to boost hiring and restore wages eroded by inflation.
Helga Pile, deputy health director at the Unison union, said strike action had been driven by a cost-of-living crisis, with inflation outpacing wages and more generous offers from other industries.
“Many private sector employers are raising wages and it turns out that this is something that many NHS workers cannot ignore,” Pyle added.
Job vacancies in the health sector remain at record highs, although official data showed health and social work wages rose at an annual rate of 6.8% in the three months to June, up from 5.3% in the previous three months.
However, wage pressures in the sector are expected to ease next year. While disputes with key groups of doctors remain unresolved, NHS employers chief executive Danny Mortimer said “the way the pay dispute with non-medical staff groups was resolved last year had a short-term impact”.
Most unions accepted a one-off payment for 2022-23 and a combined 5 per cent pay rise for 2023-24.
Reporting by Valentina Romei, Laura Onita, Sarah Neville, Stephen Morris, Sid Venkatarakrishnan, Oliver Barnes and Leke Oso Alabi
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