The Bank of England in the City of London, the UK. Picture: REUTERS/TOBY MELVILLE
The Bank of England in the City of London, the UK. Picture: REUTERS/TOBY MELVILLE

London — British workers are this year in line for their biggest pay rises since 2008 as a higher minimum wage kicks in, according to a Bank of England (BoE) survey that is likely to fuel concern about inflation among its policy makers.

The central bank said last week that interest rates would probably need to rise sooner and by somewhat more than it had previously thought to control above-target inflation. Wage growth in Britain has been lacklustre since the financial crisis.

But with unemployment at its lowest since 1975 and EU immigrants less keen to come to Britain ahead of its departure from the bloc, the BoE thinks pay is beginning to pick up.

Firms plan to offer average pay settlements of 3.1%, the highest since 2008, compared with 2.6% in 2017, the BoE said in an annual survey published on Wednesday. The biggest planned rises were in consumer services, where large numbers of staff are paid close to the minimum wage.

Britain’s minimum wage for those aged 25 and over is due to rise 4.4% in April to £7.83 an hour, while pay for some younger workers will rise more than 5%. Higher-paid staff are less likely to benefit as companies try to limit basic increases in management pay at 1%-2% to keep down overall wage bills, the BoE said.

Businesses also reported cost pressures from higher mandatory pension contributions, increased inflation, a lack of foreign workers and difficulty recruiting and retaining staff.

"Expectations that the Bank of England will raise interest rates in May will likely be fuelled by their regional agents reporting a pick-up in companies’ expected average pay settlements," economist Howard Archer at consultants EY Item Club said.

Reuters

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