UK Businesses Just Gave a Low‑Vibration Hint on Wage Growth
According to the very latest survey from the Bank of England, CFOs now expect wages to climb just 4.7 % over the next year. That’s a snug drop from the 4.9 % forecast just a month ago and the lowest in almost two years.
Why should you care? Because the Bank keeps a close eye on pay expectations to gauge domestic price pressure. If wages shimmer at a lower level, it could loosen the tight grip on inflation—and maybe even open the door to some rate cuts.
What’s the story behind the numbers?
- Over the past 24 months, firms said they’d raise pay by over 5 %, a trend the Bank associates with stubborn price hikes.
- Services inflation (which weighs heavily on pay trends) ticked up to 6.1 % in February, while headline inflation sits at a cool 3.4 %, the lowest since 2021.
- With wage growth cooling, investors might find it easier to consider cutting interest rates from the 16‑year high of 5.25 %.
What about price‑setting? How are firms keeping door open?
Even with wage expectations dipping, business leaders still see a bright outlook for price rises. They plan to bump up prices by 3.7 % over the coming year (down from 4.1 % in February), a figure that’s the lowest since September 2021.
Meanwhile, CFOs say they’re willing to hike their own costs at an annual pace of 4.8 % (a step down from 5.4 % last month).
Thoughts from a HR‑savvy CEO
Derek Mackenzie, CEO of Investigo, says:
“Pay matters, no doubt, but it’s just one piece of the puzzle. People want purpose, a path to grow, flexible spaces, and a culture that says ‘welcome’.”
“If you mix those ingredients, you attract and keep talent that’s in sync with your company’s soul, and that’s a win for both the business and its people.”
Takeaway
Wage expectations – though modestly muted – give the Bank a glimmer that inflation might finally start easing. If that holds, the next rate cut could be on the horizon. Until then, companies are still sparking price hikes, hoping to keep the living costs from spiking too high for everyday folks.
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