Stagnant growth in UK take home pay
This is from VocaLink.
Stagnant growth on the VocaLink Public and FTSE 350 Take Home Pay Index
· The VocaLink Public Sector Index is unchanged this month with annual growth of 1.3% for the three months to July
· The VocaLink FTSE 350 Take Home Pay Index falls to 2.9% for the three months to July – down from 3.3% for the three months to June
· The VocaLink Manufacturing Index increases from 2.4% in June to 2.6% in July
· The VocaLink Services Index falls from 3.4% in June to 2.9% in July
London, 4 August 2011: Public sector workers see no change in pay growth this month according to the VocaLinkTake Home Pay Index. At the same time, private sector take home pay growth falls to 2.9% this month, ending a three month growth spell. The VocaLink data suggests that the outlook for both private and public sector pay remains fragile.
Annual growth on the VocaLink Public Sector Take Home Pay Index stands at 1.3% in July – the same rate as June and the slowest of all the pay sectors. Public sector workers faced a steady decline in pay growth since April this year, when pay freezes came into force for many.
Across the private sector, growth on the VocaLink FSTE 350 Take Home Pay Index has fallen by 0.4 percentage points in the three months to July to sit at 2.9%. Despite this fall, annual take home pay growth outstrips the public sector and remains elevated compared with the average growth over the last 12 months of 1.3%. This is largely due to the £1,000 increase in Income Tax free personal allowances at the start of the current tax year.
This month’s VocaLink data shows a continued rise in take home pay growth for the manufacturing sector. Three month annual pay growth climbs from 2.4% in June to 2.6% in July – the fifth consecutive monthly increase.
In contrast, annual growth in the services sub-index has fallen from 3.4% in June to 2.9% in July. The service sector continues to face a challenging trading environment with several retailers closing and job cuts in financial services over the past week. Despite a fall in pay growth the FTSE 350 Index remains notably higher today than in 2010, when growth in take home pay averaged just 1.0%.
Overall, take home pay growth continues to trail behind the rising cost of living, with annual consumer price index (CPI) inflation standing at 4.2% in June. As pay growth fails to live up to inflation, household spending power continues to decrease in real-terms which is a key cause of weak economic growth in the UK at present.
Commenting on July’s statistics, Marion King, Chief Executive Officer at VocaLink, said:
"Pay growth remains weak for both public and private sector sector workers. Across the public sector we are seeing the true bite of pay freezes while the positive impact of Income Tax changes is being partially offset by the weakness of gross earnings growth in the private sector. We have also seen a significant fall in pay growth in the service sector, probably reflecting the difficult trading environment for retailers. With pay growth failing to keep up with inflation, household spending power continues to fall compared with a year ago – a key contributor to the weak economic growth in the UK at present."
Douglas McWilliams, Chief Executive of economics consultancy Cebr, said:
"Despite the recent fall in the rate of inflation, take home pay growth is still failing to keep pace with the rising cost of living. Moreover, inflation could start rising again later this year as utility companies increase gas and electricity prices; both Scottish Power and British Gas have announced double-digit percentage point increases in prices.”
NEW: visit the new forum: www.takehomepay.co.uk , and have your say on how UK take home pay growth is affecting peoples’ pockets and the impact on the wider economy. Or visit https://www.linkedin.com/groups/Take-Home-Pay-3988366?trk=myg_ugrp_ovr and join the debate.
Notes to editors:
The VocaLink Take Home Pay Index contrasts with the Office for National Statistics (ONS) average weekly earnings estimates which do not take into account the effects of the Income Tax and National Insurance. The VocaLink Take Home Pay Index provide measures of post-tax income rather than gross income and therefore reflect the amount of income workers are actually taking home in their pay packets.
The VocaLink Take Home Pay Index series, three month average annual change
Year 2010 2011 Month Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul % % % % % % % % % % % % % VocaLink FTSE 350 Take Home Pay Index 0.8 1.3 1.4 1.6 1.7 1.1 0.6 0.5 0.1 1.2 1.8 3.3 2.9 VocaLinkManufacturing Index 2.8 2.3 1.4 1.2 2 0.4 0.4 -0.6 -0.2 0.8 1.1 2.4 2.6 VocaLinkServices Index 0.6 1.2 1.4 1.6 1.7 1.2 0.7 0.6 0.1 1.2 1.9 3.4 2.9 VocaLinkPublic Sector Index 1.2 1.3 1.3 1.3 1.3 1.1 1.3 1.3 1.7 1.6 1.5 1.3 1.3