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Payrises likely in 2018, firms say

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19/12/2017
Confidence among UK businesses remain high, with over half of employers planning to raise wages at or above inflation over the next 12 months.

The CBI/Pertemps Network Group Employment Trends Survey provides an annual snapshot of the latest labour market trends and business sentiment. It shows a positive picture, with firms expecting to create new jobs in 2018.

Confidence is highest among small and medium-sized employers, with a positive balance of +58% expecting to add jobs in the coming year. Employment growth is being seen across all job types, with positive balance scores for permanent (+35%), temporary (+12%), graduate (+18%), and apprenticeship positions (+42%).

There was also a positive picture on pay, with over half of respondents (52%) aim to raise pay for their employees in line with (or above) inflation in the coming year. Only 3% are planning to freeze pay. The National Living Wage is having an impact. In order to cope with increasing costs, 21% of firms are raising prices, while 32% are increasing investment in training to boost the value added by employees.

However, weak productivity continues to act as a brake on pay and while pay growth has remained subdued, higher inflation means that real wages have now been falling for six straight months and are 0.4% lower on average than a year ago.

The survey also revealed weakening confidence about the competitiveness of the UK labour market as a place to invest and employ people. Half of UK businesses (50%) believe the UK has become a less attractive place to invest and do business over the past five years and nearly two thirds (63%) of businesses currently believe that the UK will become a less attractive location over the next five years.

Fewer than one in five (19%) expect it to become a more attractive location. This is partly due to Brexit and partly other factors. The respondents cited the main threats to the UK labour market as the skills gaps (79%), access to labour supply (49%) and access to highly skilled migrants (43%).

There were also significant regional differences. The number of people in work increased most in London (+130,000), the South East (+114,000), and the North West (+90,000), but fell in the East Midlands (-45,000), Wales (-28,000), and Northern Ireland (-16,000).

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