EEF Survey - Industry pay subdued through key bargaining round

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Pay growth remains subdued across manufacturing

Average settlements stuck below 2% while pay freezes spike in April

Average pay settlements across manufacturing have been subdued since the start of the year and in the second major wage bargaining round of the year pay deals have averaged 1.7%, according to EEF’s latest Pay Bulletin Survey.

In the three months to April pay increases have averaged 1.7%, slightly down on the 1.8% reported in the three months to March, but consistent with rises seen since the start of the year. One notable shift in pay trends over the past three months has been the significant increase in the proportion of pay settlements resulting in a pay freeze, which spiked to a 67 month high of 24% in April.

Average pay settlements have been heading lower over the past few years, following averages of 2.5% in 2014 and 2% in 2015, weaker pay settlement in the year to date could be signalling a number of trends. Key among these are the sluggish demand conditions facing a number of manufacturing sectors and some uncertainty running up to the EU referendum, both of which are likely to the leading to more caution in locking in higher pay awards. The introduction of the National Living Wage in April may also be leaving its mark in our latest pay survey, with companies adjusting individual pay rates to reflect the new rate in place of across the board pay increases.

Commenting on the data, Lee Hopley, EEF Chief Economist said,

“The evidence from the two major pay rounds so far this year confirm there is lid on wage inflation and any expectations of an acceleration in pay growth isn’t likely to come from manufacturers this year. There are plenty of reasons for companies to be taking a cautious stance on pay deals at the moment, particularly with a more fragile growth outlook and political uncertainty on the horizon. Added to this is the introduction of the National Living Wage, which has potentially prompted a shift in companies’ approach to across the board pay increases. This will be a trend to watch as the NLW rate accelerates out to 2020.”   

Other new research published today from EEF shows that underlying labour conditions in manufacturing have stabilised, with labour turnover rates recovering back to pre-recession levels. Turnover rates have been creeping up over the past few years, as the economy has moved back into recovery and labour market conditions have normalised. We’ve seen a similar picture in official data which points to the number of vacancies in manufacturing creeping back to pre-recession levels.

https://www.eef.org.uk/resources-and-knowledge/research-and-intelligence/industry-reports/labour-turnover-report

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