Pay growth is set to see a welcome rebound next year as companies start hiking wages in the face of mounting recruitment difficulties, according to a Bank of England report.
The latest report from the Bank’s agents said firms were finding it increasingly difficult to recruit across a range of activities, which had led to a slight increase in pay growth.
This signalled that pay settlements may rise from a range of 2% to 3% this year to around 2.5% to 3.5% in 2018, the Bank said.
It would come as welcome relief to financially-squeezed British workers, who have been hit by a double-whammy of poor wage growth and surging inflation over the past year.
The Bank last week raised interest rates for the first time in a decade – from 0.25% to 0.5% – as it looked to cool Brexit-fuelled inflation.
Governor Mark Carney said on announcing the decision that the “worst” of the income squeeze was over for households, with wage growth set to pick up.
Real wage growth is the slowest it has been since the 1950s as productivity has struggled, with the trend exacerbated by rising prices caused by the pound’s devaluation since the Brexit vote.
The most recent official figures show that real pay fell 0.4% as inflation outstripped average wage growth in the three months to the end of August.