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Average pay deal in Britain worth just 2%, data shows

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The average pay deal across the UK is worth just 2%, despite a rise in prices that pushed the retail prices index (RPI) – a widely used measure of inflation in pay bargaining – to 6% this month.

According to the latest figures from the consultancy XpertHR, pay bargaining across some of Britain’s biggest private and public sector employers showed median basic pay increased 2% in the three months to the end of October, unchanged for the seventh consecutive month.

“The data shows that pay awards are at the same level as this time last year and confirms a period of stability after awards dipped in the middle of 2020 and the beginning of 2021,” the firm said.

In a clear signal that inflation is causing a sharp decline in disposable incomes across much of the workforce, a survey of employers also found they were expecting to increase pay by only 2.5% over the next year.

Sheila Attwood, the firm’s pay and benefits editor, said: “Many employers are already looking ahead to the new year and gathering information in advance of finalising their pay budgets. They will be acutely aware that inflation is going to eat into the value of any employee pay rises over the coming year.”

Official figures showed a spike in earnings growth earlier this year as pay recovered from wage cuts and freezes imposed by employers in the wake of the first lockdown in March 2020.

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The Office for National Statistics (ONS) said total annual pay growth including bonuses and job promotions rose above 8% before falling back to below 5% in the last month, though it cautioned that the pay trends were difficult to track during the pandemic. It said pay growth was more likely averaging nearer 3.5% to 4% in the year to September.

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Elsewhere, employees paid the national living wage will receive an uplift of 6.6% to their hourly rate next April, while the Living Wage Foundation said its member organisations would increase basic pay by 4.2% from November.

Bank of England officials have become concerned that workers will demand higher pay to compensate for spiralling rates of inflation.

The Bank’s preferred measure of inflation, the consumer prices index (CPI), jumped more than one percentage point last month to 4.2% while the more volatile RPI, which is not considered a reliable national statistic by the ONS, jumped to 6%.

Most union negotiators consider RPI, which includes mortgage interest bills, to be a more realistic measure of the current cost pressures faced by most households. CPI takes no account of housing costs.