2024.02.2115:13:00UTC+00U.K. Pay Awards Fall As Economy Slips Into Recession

U.K. employers lowered the pay awards in settlements at the start of the year as the economy entered a recession and the news would offer some relief to the Bank of England policymakers as inflationary pressures are likely to ease in the months ahead, allowing them to consider an interest rate cut.

The median basic pay award for the three months to the end of January fell to 5.1 percent from 6.0 percent in the October to December period, , results of a survey by the human resources firm XpertHR showed Wednesday.

With headline CPI inflation falling from 10.1 percent in January 2023 to 4 percent in January 2024, pay awards had been expected to follow suit, the firm said.

Citing its own research, XpertHR said around half of pay awards in a matched sample analysis was worth less than the previous year's settlement and this reflects the easing trend. "We are already beginning to see that around half of employee groups are receiving settlements worth less than their previous award, where high awards were provided to account for the rising cost of living affecting UK employees at the end of 2022 and throughout 2023," Sheila Attwood, XpertHR senior content manager, said.

High inflation levels and elevated pay awards budgets in 2023 put pressure on organisations and this year they will be limiting their budgets, Attwood said. For January, a median pay settlement of 5 percent was recorded, which was slightly lower than the headline figures for the current rolling quarter, Attwood added.

Official data released last week showed that the annual growth in average earnings excluding bonuses slowed less than expected to 6.2 percent in the fourth quarter from 6.7 percent in the prior period.