Our panel of City economists considers that while inflation is unlikely to rise in the short term, it is likely to remain at or above 3% over the coming 18 months. The prospects for inflation are probably best summarised in the Bank of England’s recent Inflation Report, released on 10 May. It said: ‘Conditional on market interest rates, domestic inflationary pressures are projected to build over the forecast period while the contribution from energy and import prices dissipates.’
Pay growth looks to be picking up again, as shown by our own data on pay settlements, official figures on average earnings, and reports from the Bank of England’s agents. IDR’s monitoring indicates that the proportion of deals worth 3% or more is rising.
Continue reading Viewpoint – It’s time to think more strategically on pay
The NHS pay offer is a significant deal that signals the end of the 1% cap on public sector pay rises and as such includes genuine improvements for existing staff. However it also involves future changes that may be less welcome for some. Under the proposed deal, headline rises for those at the tops of their bands are accompanied by changes to the pay structure which mean that staff who have not yet reached the tops of their pay bands would receive significantly higher earnings increases – via progression pay – over the course of the three-year deal. But from 2020 progression for new employees would be more limited than currently. Continue reading Proposed NHS pay deal: swings now, roundabouts later?
Inflation is likely to only slowly abate over the coming year, according to the latest predictions from City economists. One of our panel of economic forecasters sees RPI inflation remaining at similar levels for most of the coming year, and another thinks it will rise a little before coming down later in 2018. Continue reading Forecasts indicate gradual drop in inflation levels
The latest instalment in the debate over which inflation indicator is the most appropriate for uprating benefits such as pensions took place in the High Court in January. The case, brought by telecoms firm BT, was that the company should be allowed to change provisions for uprating pension payments from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI), on the basis that the former had ‘become inappropriate’, according to the rules of the scheme. The case has implications for setting pay as well as pensions.
All of our panel of City economists see RPI inflation peaking in the next month or two and thereafter coming slowly down. Our rounded average of the predictions from seven City forecasting bodies shows the RPI, which is currently at 4% for the year to October, falling to 3.6% in the year to February. The February figure will be released in mid-March and as such will be the extant measure when many companies’ April 2018 pay reviews take place.
The Budget on 22 November sparked a debate over the prospects for wage growth over the coming period. The Bank of England is on one side, while on the other stand the government’s Office for Budgetary Responsibility (OBR) and the Institute for Fiscal Studies (IFS).
Earlier, in announcing its decision to raise interest rates marginally on 2 November, the Bank argued that while pay increases are currently subdued – mostly because employment has been growing in lower-paid occupations and industries – it expected earnings growth to strengthen during 2018. This will occur, the Bank said, ‘as the tightening labour market starts to put more widespread upward pressure on wage demands’. Continue reading Viewpoint: ‘There are bad times just around the corner…’
The latest IDR analysis of pay settlements shows that Continue reading Private sector pay settlements remain at 2.4%
Inflation could rise to just below 4% on the all-items RPI measure by the autumn, according to our panel of City economists. Thereafter it could fall, but slowly. This assessment is based on our rounded average of the predictions from eight forecasters. The panel divides evenly between those who see RPI reaching 4% and those who think it is unlikely to rise this far. The main point of difference is based on whether the upward pressure on import prices from sterling’s previous depreciation, following the vote to leave the EU, have mainly worked through, or whether most of these effects remain to be felt. Continue reading Forecasters think inflation could rise to just below 4% by autumn
In this case study we look at the pay agreement covering the civil engineering works currently being undertaken to construct the nuclear power station at Hinkley Point in Somerset, work on which began properly in March. The pay structure’s guiding principle is progression via the acquisition of skills, and as such, may be a model for pay systems in other parts of the economy. Continue reading Nuclear construction pay agreement