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Press Releases Policy publications - Productivity & growth

Positive news on wages, but questions over how long it will last

17 Apr 2018
workersResponding to official labour market statistics, showing that wages grew by 2.8% compared with a year earlier, Tej Parikh, Senior Economist at the Institute of Directors, said:

“The labour market continues to be a bright spot for the UK economy. Businesses are creating new jobs, unemployment is at its lowest in 42 years, and workers will be reassured now that the worst of the squeeze on real pay packets appears to be behind us.

“The above inflation wage growth will no doubt help the Bank of England rubber stamp its anticipated rate rise next month, but the big question is whether the forward momentum on hiring and wage growth can be sustained. Many employers are already straining to fill vacancies due to chronic labour shortages, which have been compounded in a number of sectors, including social care and hospitality, by the notable drop in the number of migrants coming to the UK. 

“A further pick-up in salaries will also be restrained by the limited ability of SMEs – which employ 60 percent of the workforce – to compete for a shrinking pool of labour. As such, small business owners will need greater support in managing regulatory costs and raising their productivity if wage growth is to become a long-lasting facet of our economy.”

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