© Reuters. FILE PHOTO: People walk through the Canary Wharf financial district of London, Britain, December 7, 2018. REUTERS/Simon Dawson
By David Milliken
LONDON (Reuters) – British employers have increased how much they plan to raise staff pay this year, a survey showed on Monday, but the expected pay rises are well below those in a Bank of England survey which influenced this month’s interest rate rise decision.
Britain’s central bank is concerned that a surge in inflation to a 30-year high, driven by a spike in energy prices, may turn into persistent high inflation if it leads to bigger pay demands and widespread price rises for other goods.
The BoE raised its main interest rate to 0.5% from 0.25% on Feb. 3 and a number of policymakers have said their thinking was influenced by a recent annual BoE survey that showed companies planned to raise pay by an average 4.8%.
However, other surveys of businesses’ pay plans point to much smaller increases.
Monday’s monthly data from a Lloyds (LON:LLOY) Bank survey of 1,200 companies showed 25% of businesses planned to pay rises of 1%-2% over the next 12 months, while 23% planned 2%-3% pay rises. Around a quarter expect pay to rise by 3% or more.
Although these percentages are all up slightly from last month – and the number of firms planning pay freezes or smaller pay increases has fallen – this suggests the inflationary pressure from higher pay will remain low.
Other surveys have shown businesses expect to raise pay by around 3% this year.
Just under half of companies in the Lloyds survey – conducted between Feb. 1 and Feb. 15 – said they expected to raise prices because of increased costs.
The BoE expects consumer price inflation to peak at around 7.25% in April when regulated household energy tariffs rise by more than 50%.
UK employers nudge up planned pay rises – Lloyds
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