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News - 26 June 2014

No wage rises until jobless rate falls to 5 per cent

 No wage rises until jobless rate falls to 5%

 
Martin Weale, a Bank of England policymaker, has suggested that average wages may not rise until the jobless rate has fallen to 5%. There is more spare capacity in the economy than policymakers had previously estimated, which means that employers have room to keep hiring for some time before they have to increase wages to attract scarce workers.
 
In a speech to business leaders at a Confederation of British Industry (CBI) conference in Northern Ireland Dr Weale said for every one percentage point that unemployment was  "above its equilibrium," quarterly pay growth was likely to be 0.3% lower "than it would otherwise be".
 
Stuart Coleman, Manager of the Tax Department of ABDS comments:
“In its February quarterly inflation report the Bank of England estimated there was between 1% and 1.5% of spare capacity in the UK economy, but Dr Weale's remarks suggest that could be as high as 2%. Spare capacity most often stems from underinvestment by businesses. It is the Bank of England's way of gauging how far GDP is below its potential growth.”
 
Although employment is at record levels, an increasing number of jobs are part time. The latest figures from the Office for National Statistics (ONS) show the number of people in part-time employment increased by 104,000 to 8.17 million.
 
And in April the ONS said nearly half of big companies in the UK use a total of 1.4 million zero-hours contracts, which do not guarantee minimum hours.
 
It has previously estimated that 583,000 people, around 2% of the UK workforce, were employed on zero-hours contracts between October and December 2013.
 
Stuart continues:
“it is also worth noting that several economists have changed their interest rate forecasts since the governor of the Bank of England, Mark Carney, hinted during his annual Mansion House speech to business leaders that an interest rate rise "could happen sooner than markets currently expect".”
 
If you need any help and advice with your PAYE, RTI or CIS, or looking to outsource your Payroll Department, contact ABDS NOW to discuss how we can help.
 
ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900 E-mail: abds@netaccountants.net
 
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Great with people  
Clear and precise with advice
Timely and cost effective
In touch with issues that face our clients
Mindful of our client’s long term strategic goals
 
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