A survey of more than 2,000 businesses has shown that UK private sector workers can expect to get a 5% pay rise this year, which is the highest in a decade.
The survey, carried out by the Chartered Institute of Personnel and Development (CIPD), showed that more than half of employers said that, against the backdrop of worker shortages, they expected to raise base or variable pay in 2023. Expectations are lower for public sector rises, however.
The expected 5% pay rise would be the highest since 2012 when CIPD started its quarterly survey. However it is still not enough to translate into a real terms pay rise as inflation stood at 10.5% in December.
The UK narrowly avoided going into recession at the end of 2022 but, despite a relatively weak economic performance, unemployment stuck at almost record low levels of 3.7% in November, translating into a shortage of workers.
A senior labour market economist for the CIPD Jon Boys said: "Skills and labour remain scarce in the face of a labour market which continues to be surprisingly buoyant given the economic backdrop of rising inflation and the associated cost of living crisis.”
There was a big difference between the predicted pay rises in the private sector (5%) and public sector (2%). The CIPD said that this gap gives context to the wave of strike action by public sector currently taking place which includes nurses, rail workers, ambulance drivers, teachers and civil servants.
The drop in real pay experienced by public sector workers is around 5.5%, compared to around 1.9% in the private sector.
The survey also showed that employers were struggling to fill vacancies, with 57% reporting they had vacancies that were difficult to fill.