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British Executives earn lowest real pay rate in Western Europe

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Senior managers in UK firms have among the lowest levels of disposable income in the world, according to a new study by global management consultancy Hay Group. “The World Pay Report 2008” places UK executives just 47th in the real pay stakes out of 51 economies analysed. The study also reveals a downward trend for management purchasing power in Britain, with this year’s ranking significantly worse than last year’ position (40th of 47).

Hay Group’s analysis finds senior managers in the fast-growth economies of the Middle East, Asia, and Eastern Europe enjoying the highest spending capacity, as demand for management talent far outstrips supply in these markets. Real pay in Western Europe, the US and Scandinavia lags by comparison.

The report compares detailed salary information for 51 countries from Hay Group PayNet, the world’s largest pay database. Hay Group related pay to cost of living and tax rates, to calculate real pay – the true purchasing power of executive salaries. The study defines senior managers as heads of function or department in large multi-national companies.

British executives are the fifth poorest in real terms, according to the report, ahead of only Indonesia and the highly expensive Scandinavian economies. The UK’s lowly ranking reflects the combination of relatively high tax rates and cost of living than in developing economies, the study concludes.   And as the economic downturn continues to bite, and inflation remains stubbornly high, disposable income at senior level is likely to erode even more, further damaging UK Plc’s competitiveness when attracting global/globally mobile talent.

Managers in other Western European countries tend to have spending power towards the middle-to-lower range, the report finds – with the UK the lowest paid among them. Senior executives in Austria (15th in the table), Germany (18th) and Switzerland (20th) fare relatively well.

The oil-driven economies of the Middle East dominate the table. Qatar boasts the world’s best paid managers, who earn over two and a half times the salaries of their British counterparts in real terms.  Executives in the United Arab Emirates are the next best paid, while those in Oman (6th) and Kuwait (7th) also enjoy over twice the real incomes of British managers. Even Bahrain, the lowest paid Gulf state studied, lies 13th of the 51 economies analysed by Hay Group.   
As might be expected, managers in emerging economies enjoy buoyant disposable incomes. China lies an impressive 17th in the management pay table, with executives earning over 1.5 times the real salaries of their British colleagues. Thailand is higher still (10th).   
Disposable income in India (38th) remains lower than in other emerging economies. However, with rapid economic acceleration fuelling headline salary increases of 14% a year, disposal income for Indian managers is expected to rise. The spending power of managers in Central and Eastern Europe continues to outstrip that of those in Western Europe – and as predicted in last year’s World Pay Report, the gap has widened.  Turkey is the highest placed European country, placed 5th in the global table. Romania and Russia are 8th and 9th respectively, with Poland 14th and Lithuania 16th.   

In line with many other developed economies, the US is ranked firmly towards the bottom of the table in 41st place. However, factors other than economics may have an influence. Department head roles are likely to be further down the corporate ladder in US firms than those in many emerging economies.





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