Manufacturing pay well above UK wage growth rate despite surging price level

Average pay settlements in manufacturing rose to 2.3 per cent in May 2017, the manufacturers organisation EEF has reported.

The rise in pay level shows manufacturing stands out against other sectors such as retail and public services as an area of wage growth.

EEF’s pay survey of 97 settlements has shown a majority of staff in manufacturing have had a pay rise around 2 per cent.

The inflation rate is currently 2.9 per cent – across Britain real earnings have fallen by 0.6 per cent month on month. Frances O’Grady, general secretary of the Trades Union Congress (TUC), said: “Real wage growth has now fallen for the second month in a row. Unless the government gets its act together, we'll soon be in the middle of another cost of living crisis.”

Most employees have been granted a pay rise at 2 per cent, though one in four pay settlements resulted in a pay increase at or above 3 per cent, ahead of inflation.

EEF believes the trend reflects upward pressures on manufacturing pay as inflation surges. Inflation soared to 2.9 per cent in May after it overshot the Bank of England’s 2 per cent target in February.

British manufacturers are continuing to enjoy a surge in performance on the back of a worldwide upswing in markets, powered by high productivity in the USA and Germany. To meet busy order books, the need to recruit skills and increase productivity is pushing manufacturers to offer higher pay levels.

Hela Mrabet, EEF Senior Economist, said: “In what should be good news for many parts of the manufacturing workforce, the second quarter of this year sees a steady rise in pay settlement levels across the sector. Companies are responding to several factors that are having an upward pull on pay growth – a rise in inflation, the increase in the national living wage and busy order books requiring more employees and higher productivity.

“In addition, manufacturers’ confidence is holding up and their profit margins are in a better shape than they were a few months ago. This is prompting manufacturers to offer higher pay levels.”