Bank of England survey shows pay growth increasing in 2018

Mark Carney
of England Governor Mark Carney smiles as he attends the World
Economic Forum (WEF) annual meeting in Davos, Switzerland January
26, 2018.


  • Bank of England agents’ survey shows that real wages
    will grow by 3.1% in 2018.
  • That’s well ahead of 2017’s 2.6% growth, and would mark
    a return to real wage growth.
  • Rising inflation since the Brexit vote has squeezed the
    pockets of the British people.

LONDON — Wage growth in the UK is set to pick over the course of
2018, with overall incomes growing for the first time since early
2017, the Bank of England’s monthly agents’ survey shows.

The agents’ summary of business conditions, which polls the
central bank’s operatives in the UK’s regions to create a
holistic picture of what’s going on in the economy, showed that
businesses expect wage growth to increase to 3.1% in 2018, up
from 2.6% last year.

With inflation expected to fall from its current level of 3%
that means Brits are set to see their real wages grow, albeit
slowly, over the course of the year — a condition that has been
largely absent for workers since the vote to leave the EU in June

“The survey indicated that companies expected an average pay
settlement rate of 3.1% in 2018, compared with 2.6% in 2017,” the
Bank of England said.

“The 2017 outturn was higher than the 2.2% that had been expected
in last year’s survey, reflecting larger settlements across a
broad range of sectors.

“The increases in pay settlements in 2018 are also expected to be
broad-based, with only the construction sector expecting pay
settlements in 2018 to be the same as in 2017.

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“Total labour cost growth continued to pick up, largely due to a
combination of recruitment difficulties, the rising cost of
living and the increase in the National Living Wage,” the survey

Here’s the Bank of England’s chart (the pale blue diamond is
where wage growth is expected by the end of the year):

Bank of England wage growthBank of

Between 2008 and 2014 inflation outstripped pay, causing
real wages to fall. Although this was reversed in 2015 and 2016,
last year saw a 

fall in real wages

 following the Brexit referendum
and drop in the value of the pound. Inflation, which was at
0.5% in June 2016, 

to 3.1%

 in November 2017.

growth was 2.4%

 in October 2017.

Falling real wages come at a time when unemployment in
Britain is at a near record low, with the unemployment rate at
just 4.3%.