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UK Firms Temper Pay and Price Hopes
8 Jan
Summary
- Businesses expect smaller pay rises of 3.7% in the next 12 months.
- Firms anticipate raising their own prices by 3.6% over the year.
- Employment is predicted to decline by 0.4% in the coming year.
UK businesses are signaling a moderation in their outlook for the upcoming year, with slightly lower expectations for both wage increases and price hikes. Firms surveyed by the Bank of England now predict an average pay rise of 3.7% over the next 12 months, a marginal decrease from earlier forecasts. Similarly, expectations for company price increases have also been revised downwards to 3.6%.
These adjustments come as Bank of England officials remain watchful of persistent wage and price expectations, particularly in light of recent inflation surges. While price pressures have eased more rapidly than anticipated, contributing to hopes of inflation returning to the 2% target by spring, the labor market shows signs of strain.
For the past year, businesses collectively cut employment by an estimated 0.4%. Although December saw a slight recovery in headcount, a net decline of 1.8% occurred in November. Looking ahead, firms foresee further job losses, predicting a 0.4% reduction in employment over the next 12 months, a concerning indicator not seen since 2020.
