Manufacturing pay starts to rise, as inflation increases

Pay deals were up and pay freezes were down in January, says the EEF

Average pay settlements have gone up, while pay freezes have gone down, according to the latest data from EEF, the manufacturers’ organisation.

While the data boded well for the rest of 2017, the EEF said the acceleration remained modest compared with that of consumer price inflation. This meant that workers could still end up feeling the pinch while employers could come under wage pressure, it added.

The EEF’s Pay Bulletin noted that with a significant number of pay settlements agreed in the January bargaining round, the monthly data was a useful predictor of wage growth across manufacturing for the year ahead.

It said the monthly average pay settlement for January alone at 2.0%, was slightly up from the average pay deal of 1.8% for the same month a year ago.

Pay deals

Between November and January, two-thirds of pay deals were agreed at or below 2%, consistent with the distribution of settlements over the past year.

However, the upward move in the average pay deal in January reflected two major trends at both ends of the pay spectrum, the EEF claimed.

The first was the fall in the proportion of settlements resulting in a pay freeze. Pay freezes became a more prominent feature for manufacturers in 2016, peaking at 26% of settlements in August as firms became more cautious in the face of uncertainty.

But in January this year, the share of pay freezes fell back to 9% of settlements agreed since November and to 7% of settlements for January alone.

Share of pay deals fell

The second trend was a slight rise in the proportion of pay deals agreed above 2%. These accounted for one-in-three pay settlements in the three months to January, most of which fell in the 2–3% range.

“The first indications from the January major pay round show an increase in average settlements across manufacturing,” said Lee Hopley, EEF chief economist.

“As uncertainty continues around business conditions, manufacturers remain cautious when it comes to pay rises.”

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