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According to the latest quarterly Labour Market Outlook report from the CIPD (Chartered Institute for Personnel and Development) and Adecco, median basic pay expectations in the 12 months to September 2018 are 2%, up from 1% in the previous quarter.

The report, which surveyed more than 2,000 UK employers, also showed that 24% of employers in the private sector say they are under some or significant pressure to raise wages from the majority of their workforce. However, 38%, of private sector firms say they face no pressure to raise wages for certain roles.

The most common reason given by private sector employers for the lack of pressure to raise wages is a recognition among workers that the business cannot afford more generous pay increases, underlining the productivity challenge many firms face. 

Meanwhile, the share of public sector organisations that are under pressure to increase wages is much higher than in the private sector, which the report states may partly reflect the recent debate about scrapping the public sector pay cap.

According to the report, 59% of public sector organisations say they are under some or significant pressure to raise wages for the majority of the workforce. Furthermore, 25% of public sector organisations say that they are under some or significant pressure to raise wages for certain roles.

Meanwhile, the short-term jobs outlook suggests that employment growth looks set to remain strong for the rest of the year. This quarter’s net employment balance, which measures the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels, has remained stable, standing at +26 compared with +27 in summer 2017.

“This survey provides further evidence that productivity has a far more significant bearing on pay growth than the tightness of the labour market,” Gerwyn Davies, CIPD Senior Labour Market Analyst, said. “In terms of employment, despite the evident optimism in this quarter’s survey, it remains likely that the sharp increase in the number of people in work over the past year will ease during the course of 2018. This is due in part to the impact of continued slower economic growth, the uncertainties associated with Brexit and the prospect of further interest rate rises. However, employment prospects for the manufacturing sector look bright, perhaps buoyed by the benefit of a weaker currency and the strength of global demand.”