Wage growth is starting to “stagnate” after a fall in the annual rate of increase in take-home pay, according to a new report.
The annual rise fell from 1.9% in December to 1.4% last month, with bigger reductions in manufacturing firms, a study found.
Research by VocaLink, which provides services to banks, showed that the biggest increases were in services firms, although they also fell back from 1.7% in December to 1.6% last month.
The slower-than-expected drive out of recession had fed through to wages, resulting in weaker pay growth, according to the study of 100 companies.
Marion King, chief executive of VocaLink, said: “Although we are now technically out of the recession in the UK with the last official GDP estimate, pay growth rates are not going to return to those pre-recession levels for quite some time.
“Stagnating salaries combined with the restoration of the 17.5% Vat rate are going to have a real impact on households’ spending power.”
Douglas McWilliams, chief executive of economics consultancy cebr, commented: “The recovery - which is already slower both in magnitude and timing relative to expectations - is likely to be sluggish and fragile.
“The implication is that labour market conditions will remain weak for quite some time. Following the VAT cut reversal, we expect a period of rising inflation without a corresponding increase in pay growth which will further limit disposable income for the foreseeable future.”
