Higher wage rises are one likely precondition for increasing interest ratesAccording to a recent Bank of England survey, British private sector employers plan to raise wages by 2.8 percent this year compared with 2.4 percent in 2015.
The annual survey of employers covered 342 companies with a total of 600,000 staff. The responses are adjusted to make them representative of private-sector firms in the economy as a whole.
Mark Carney, BoE Governor, has said higher wage rises are one likely precondition for increasing interest rates. Growth in average earnings reached 3 percent in mid-2015 but slowed up later in the year.
Last week the BoE trimmed its wage growth forecast and stated that average weekly earnings would rise at an annual rate of 3 percent by the end of 2016, compared with an average of more than 4 percent before the financial crisis in 2007.
The increase in wages was expected to be highest in the consumer services sector, where retailers and restaurants are exposed to larger-than-normal increases in the minimum wage.
“Broadly consistent with the expected pickup in settlements, a net balance of nearly 40 percent of respondents expected total labour cost growth per employee to increase in 2016, compared with an equivalent figure of just over 20 percent in last year’s survey,” the central bank said.
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