VocaLink Take Home Pay Index Shows Weak Wage Growth

The VocaLink Take Home Pay Index for October showed flattening pay growth gripping the UK as it held steady at a low 1.7%. This is the third month in a row of broadly static wage growth, with levels predicted to remain steady for the next two or three years as the economy slowly recovers against a backdrop of fiscal tightening.

There was some movement within the two key sub indices. The most change was seen within the VocaLink manufacturing index that rose by 0.6 percentage points to 1.5% pay growth in October. While still low wage growth, this was a 1.0 percentage point improvement of the all-time low seen in July. However, with manufacturers currently experiencing a slight uplift as inventory levels are replenished and the weakness of the pound buoys the export market, it is likely that this pay growth increase may prove temporary.

Although the VocaLink services index fell a further 0.3 percentage points to 1.8% pay growth, a full percentage point down on August, it is likely that this level of wage growth will remain broadly static for the immediate future. This was caused by the dampening of the pace of rises in business and consumer sentiment which was higher during the summer months and has since slowed, combined with increasing slack in the labour market and the fiscal tightening all parties are promising after the next UK general election.


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