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Bank of England governor sets timetable on pay increases

17/09/14

The governor of the Bank of England has said pay will soon start rising in real terms.

For a great many people in the UK economy, the feel-good element of the recovery has been somewhat threadbare.

While unemployment has plunged, the failure of pay rates to keep up with inflation has meant that people have been continuing to feel the pinch, despite low inflation in the past year.

The Bank of England has forecasted that this overall trend will continue for the whole of this year, with average pay rising by just 1.25 per cent.

Reflecting on when this might change, the bank's governor Mark Carney has been addressing the annual conference of the Trades Union Congress in Liverpool.

He noted that overall hiring levels in the UK have been much higher than elsewhere and that the low levels of wage settlements have enabled employers to take on more staff than would have been the case otherwise, aided by a growth in the supply of labour as the workforce has expanded to record levels.

However, Mr Carney said, this situation will not persist. Real terms wage growth will resume in the middle of next year and three years hence will be running at an average of four per cent.

Finance sector workers may ask how all this may affect them, particularly in view of how the sector has performed in pay terms over recent years

The 2014 Marks Sattin Insight Report found 71 per cent of finance sector workers have had a pay review within the past year, something many people in other sectors have not enjoyed. Moreover, 67 per cent received a pay rise, compared with 32 per cent whose income was frozen and just one per cent who asked to take a cut.

Overall, 46 per cent of permanent employees were satisfied with their remuneration and 30 per cent were dissatisfied, with the satisfaction levels being very slightly better for contract staff.

While this situation may be better than that experienced in some parts of the economy, it may open up the possibility that finance workers will be able to enjoy greater pay and rewards in the near future - if not in their own jobs, then by moving to a rival willing to offer a better package.

 

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