Manufacturing pay ahead of UK wage level

A survey of 77 British manufacturing firms by EEF, the manufacturers’ organisation, has revealed manufacturing to be one of the rare sectors maintaining pay increases with price levels.

Inflation is currently running at three percent, with national wage growth at two per cent.

Average pay settlements in manufacturing rose to 2.1 per cent increases in April 2017, and the proportion of pay freezes fell to less than one in ten settlements.

EEF reported more pay freezes over 2016, with over a quarter (26 per cent) of settlements last August resulting in a hold.

Pay freezes in the three months to the end of April fell to 9 per cent of settlements, while deferrals accounted for almost 2 per cent of settlements amongst companies surveyed.

Despite leading the industrial pack, manufacturing pay still lags behind inflation as deals above the 3 per cent rate of inflation remain few and far between, accounting for less than 3 per cent of all settlements.

Weak growth in services and construction have led to a national drop in average weekly earnings from 2.3 per cent to 2.1 per cent.

Hela Mrabet, Senior Economist at EEF, said: “The second major bargaining round of the year confirms the upward trend in pay settlement levels across manufacturing in response to the continued rise in inflation. The strong momentum in wages within manufacturing contrasts with the [lack of] pace seen in the economy as a whole, where growth in earnings fell to 2.1 per cent in the first quarter from 2.3 per cent in the final quarter of 2016.”

“As business conditions continue to surprise on the upside, the sector enjoys tailwinds from a stronger global economy and, with the pressure from past surges in input costs somewhat easing, manufacturers are also offering higher pay increases than they did earlier this year.”