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UK pay growth predicted to slow in 2020

Detail of a woman counting money for payment.
New analysis shows UK pay growth is likely to slow in 2020 as employers are being cautious with their pay awards. Photo: Getty

"Cautious" employers are not likely to give UK workers bigger pay rises in 2020, the most recent figures suggest.

Average pay awards at UK companies at the end of last year and early this month dropped slightly, according to consultants XpertHR.

The median pay rise fell from 2.6% in the three months to the end of November to 2.2% in the three months to December, the analysis of a sample of pay awards from 1,600 employee groups found.

A sample in January found median pay rises of 2.3%. The average across 2019 had been 2.5%, suggesting pay growth slowing in the New Year.

READ MORE: UK wage growth slows as small firms 'struggle to raise salaries'

The analysis also found almost half (48.8%) of pay awards were worth less than the settlement received by the same group of employees a year earlier.

XpertHR pay and benefits editor Sheila Attwood said: “The 2.5% median pay award across 2019 represented no change on the previous year. The first pay deals of 2020 suggest that employers are taking a cautious approach, leading us to believe that there will be no jump in pay award levels in 2020.”

The figures come as business leaders warned on Tuesday small firms are “struggling to raise salaries.” Tej Parikh, chief economist at the Institute of Directors (IoD), said wage growth had “disappointed” in recent months.

“In particular, small businesses have been struggling to raise salaries to attract new staff, and they will be hoping for cost-cutting measures at the March Budget, alongside more investment in the UK’s gummed-up skills system,” he said.

READ MORE: UK employment hits new record high as Bank weighs rate cut

The new figures echo official data released earlier this week, which also showed pay growth slowing.

Figures released by the Office for National Statistics showed actual pay growth of 3.4% between September and November excluding bonuses, down from 3.5% between August and October.

The Bank of England is watching pay growth and the broader labour market as it weighs up whether to announce a cut to interest rates on 30 January.

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