UK Wages Decline: 'Little Prospect' of Higher Pay Rises by 2014

Britons' pay misery will last until at least the end of 2013 as wage rises stay capped at lower than the rising cost of living, according to a human resources specialist.

XpertHR, an online information hub for HR professionals, said the median pay rise has been 2% for four consecutive quarters and will not rise above this before the end of the year.

Price inflation has been consistently above the government's 2% target in recent years, while incomes suffer in the public sector austerity-hit domestic economy.

In July, Consumer Price Index (CPI) inflation was 2.8%. Official figures also show regular pay, excluding bonuses, lifted by just 1.1% in June.

Sheila Attwood, editor of XpertHR's Pay and Benefits information service, said employees faced "little prospect of higher pay rises".

On a sector breakdown in the UK economy, pay awards differ vastly. XpertHR said private sector pay variation ranges from a 10% pay cut to a 3.5% pay rise.

Public sector workers have seen their pay rises anchored by a 1% cap imposed by the government under its public sector austerity drive, to erase the Treasury's structural deficit.

XpertHR noted that 70% of pay bargaining is done in the opening four months of the year, so the UK is in a "quiet period".

Personal allowance

The government claims it is easing the impact of declining incomes on the poorest workers in society by lifting the personal allowance threshold, the point at which an individual starts paying income tax on their earnings, to £10,000 in 2014.

Research by the Trades Union Congress suggests that the lowest paid workers will be four times worse off because of the January 2011 rise in VAT, which was lifted to 20%, then what they will get back from lifting the personal allowance threshold to £10,000.

Separate research by the anti-poverty thinktank Joseph Rowntree Foundation found that the basic cost of living in Britain has risen 45% across a decade, even as incomes dropped sharply in the aftermath of the financial crisis.

As well as rising prices and bills, UK incomes have been hit by cuts to the country's welfare bill. Benefits rises have been capped at 1%, while payments such as child benefit and housing benefit have been removed from many former recipients to save the Treasury money.