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Modest wage growth predicted in 2019

Keith Coull

UK workers are due to get an average real-terms pay rise of 1.1 percent in 2019, which would be an improvement on the 0.5 percent they received in 2018, and is also fractionally greater than the European average of 0.8 percent, according to research. Keith Coull, Director in Data Services at Willis Towers Watson.

Data shows that UK businesses expect to increase salary budgets by 3.0 percent in 2019. Offset against a forecast CPI inflation rate of 1.9 percent, this could leave a pay rise of 1.1 percent in real terms.

Willis Towers Watson’s Salary Budget Planning Report is a global study of how businesses expect to increase their overall salary budgets, which have a direct impact on wage levels.

In addition to beating the EU28’s inflation-adjusted rate of 0.8 percent, the increase in UK salary budgets is also expected to either outperform or at least match most other European economies in 2019, including France (1 percent), Spain (0.8 percent), Austria (0.8 percent) and the Netherlands (0.9 percent). The only countries that are expected to outperform the UK’s 2019 rate are Poland (1.3 percent) and Italy (1.5 percent).

“Lower inflationary pressures and higher real wage increases are expected in the UK in 2019 compared to 2018,” said Keith Coull, Director in Data Services at Willis Towers Watson. “But behind this positive-sounding scenario, there are sharp debates in the UK about pay. A recent report by a commission of influential figures from business, finance, academia and the church called for higher wages. And of course, uncertainties around Brexit are muddying the water in economic and business forecasting.

“A recent report by the IMF also points to uneven growth prospects, escalating trade tensions, rising oil prices and some emerging market and developing economies under pressure, which may impact employers’ decision making,” added Keith Coull. “At the same time, while employers continue to face labour shortages, especially for high-performing employees, being prepared to move the needle slightly on wages will remain a key weapon to stay competitive in the war on talent, especially within the digital space.”

Globally, wage levels are expected to increase by 4 percent in 2019. The forecast data for 2019 for Europe, Middle East and Africa is in line with 2018 data – with regional salary budgets up 4.9 percent in both years. Though individual sub-regions don’t all share the 4.9 percent figure for 2019, they do all forecast similar salary budgets to those seen in 2018.

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