Companies across the UK are cutting back on hiring amid the prevailing economic uncertainty, a report says
UK workers may face lower wage increases this year as employers are mulling cutting pay rises amid persisting economic woes, a recent report by the Chartered Institute of Personnel and Development (CIPD) has found.
The drop in wage growth comes as many UK employers are cutting back on hiring plans due to slowing growth, the report said.
The average future expected pay rise in the UK dropped to 4% in the final quarter of 2023, after holding at 5% for some time, marking the first fall since the beginning of the Covid-19 pandemic. The median expected increase across the private sector showed the same expected decline from 5% to 4%, whereas the expected decrease in the public sector was steeper, from 5% to 3%.
“This feels like a key moment in the UK labor market,” said CIPD senior labor market economist Jon Boys. “The public and private sector gap in pay expectations is widening again, at a time of mounting pressures on public services,” he noted.
Lower pay rises would deal a blow to Britons’ purchasing power and curtail disposable income at a time when living costs are rising, prompting many to re-evaluate their budgets and expenses, experts warned.
“We’ve seen a sustained period of high wage growth in response to a tight labor market, and high inflation pushing up the cost-of-living. Pay growth has helped individuals but it leaves employers with a higher wage bill to cover,” Boys explained.
The survey, which was conducted last month, involved over 2,000 employers. About a third of employers plan to increase their headcount over the next three months, while 10% anticipate reductions.
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