UK Economy

UK employers plan to raise wages by 2.8 percent in 2016

LONDON (Reuters) - British private sector employers plan to raise wages by 2.8 percent this year compared with 2.4 percent in 2015, a Bank of England survey showed on Wednesday, offering policymakers some assurance that wages will pick up in line with their forecasts.

BoE Governor Mark Carney has said chunkier wage rises are one likely precondition for increasing interest rates. Growth in Britons’ average earnings reached 3 percent in mid-2015 but slowed later in the year.

Last week the central bank trimmed its wage growth forecast and said 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 that began in 2007.

The BoE’s annual survey of employers covered 342 firms with a total of 600,000 staff. The survey responses are adjusted to make them representative of private-sector firms in the economy as a whole.

The increase in wage settlements was expected to be biggest 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.

Reporting by David Milliken; Editing by Catherine Evans