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Banks may benefit as wages rise in 2015

05/01/15

A Bank of England decision maker has predicted a rise in pay this year.

Pay rates in the UK are set to start rising in real terms this year, a Bank of England official has said.

Martin Weale, a member of the rate-setting Monetary Policy Committee (MPC), has tipped the increase to occur over the next year after speaking to employers across the country.

He told the BBC Radio Five Live Wake Up To Money programme: "When I go and visit businesses throughout the country, I find that they are talking of pay increases in a way quite different say from what I was hearing last year"

Mr Weale added that many of those discussing the likelihood of pay rises this year were previously only speaking in terms of freezes.

Should this prediction come to pass, there may be significant implications for the banking sector.

On the one hand, it will be good news as there will be more wages coming into current accounts and savings, giving banks more capital from which to lend. In addition to this, larger incomes in an economic environment of growth and ever-rising employment will add up to a much more benign and secure environment in which to lend more.

However, while such actors may be beneficial, financial companies will need to consider what they are paying accountants and other staff. If pay rates start rising, this may increase pressure for pay rises in the financial sector.

Indeed, those companies who fail to keep up could be at risk of losing some of their most talented staff, who could be lured away by rival companies.

Mr Weale is not alone in tipping 2015 to be the year in which the relative decline of wages is reversed. The Bank's governor Mark Carney made a similar prediction in a speech to the Trades Union Congress conference last year, pointing to the middle of this year as the time when this trend will start in earnest.

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