Manufacturing pay drifts upwards as inflation surges – EEF survey

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  • The three month average pay settlement in May rose to 2.3%, highest since December 14

  • The average pay deal in April, the second major bargaining round of the year, was revised upward to 2.5%.

  • A majority of employees have been granted a pay rise above 2%

  • One in four pay settlements resulted in a pay increase above 3% − ahead of inflation

The latest data from EEF, the manufacturers’ organisation points to a firmer momentum in pay growth across manufacturing in the second quarter of 2017.

The three-month average settlement to the end of May came in at 2.3%, the highest in our survey since December 2014. The month of April alone, the second most important bargaining month for manufacturers, was revised upward to 2.5% from a previously estimated figure of 2.2%.

The trend reflects upward pressures on manufacturing pay growth as inflation surges. Inflation soared to 2.9% in May after it overshot the Bank of England’s 2% target in February. The latest data from EEF show that six in ten manufacturing employees have been granted a pay increase above 2% in the three months to the end of May, and one in four have had a pay increase above 3% − ahead of the inflation rate. 

British manufacturers are continuing to enjoy a surge in performance on the back of a synchronised upswing in global markets according EEF’s Manufacturing Outlook published earlier this month. In order to meet busy order books, the need to recruit skills and increase productivity is prompting manufacturers to offer higher pay levels. This is underpinned by improved confidence levels and easing margin pressures from the past surges in input costs.

In addition, April saw the National Living Wage (NLW) rising by 4% from £7.20 to £7.50 an hour for 25-year-old workers. This is likely to have provided a boost to pay figures in April, although the impact is rather modest. Only 5% of settlements resulted in a pay rise at or above 4% in April and this applied to one in twenty employees in manufacturing.

Hela Mrabet, Senior Economist at EEF, said:

“In what should be good news for many parts of the manufacturing workforce, the second quarter of this year sees a steady rise in pay settlement levels across the sector. Companies are responding to a number of factors that are having an upward pull on pay growth – rising in inflation, the increase in the NLW and busy order books requiring more employees and higher productivity.

“In addition, manufacturers’ confidence is holding up and their profit margins are in a better shape than they were a few months ago. This is prompting manufacturers to offer higher pay levels, which look to be running ahead of those in other sectors of the economy.”

The pay survey includes 97 settlements covering 18,701 employees.

 

About EEF

EEF, the manufacturers’ organisation, is the representative voice of UK manufacturing, with offices in London, Brussels, every English region and Wales.

Collectively we represent 20,000 companies of all sizes, from start-ups to multinationals, across engineering, manufacturing, technology and the wider industrial sector. We directly represent over 5,000 businesses who are members of EEF. Everything we do – from providing essential business support and training to championing manufacturing industry in the UK and the EU – is designed to help British manufacturers compete, innovate and grow.

From HR and employment law, health and safety to environmental and productivity improvement, our advice, expertise and influence enables businesses to remain safe, compliant and future-focused.

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