Facing rising inflation a pay restraint and a tightening of take home pay has been advised by Mervyn King the Governor of the Bank of England. Due to higher commodity and energy prices in upcoming months, rises in inflations in the UK economy are almost unavoidable. Before falling sharply in 2012, he predicts in 2011, increases of 4 to 5%.
There is consideration of increasing interest rates to thwart an attempt to increase wages to cover the ever increasing prices. The current inflation rate has been brought about by the rise in VAT and high import prices as well as the rise in commodity and energy prices.
For the past four years, three percentage points increase in the inflation rate each year has been attributed to these factors. The UK economy is in a rebalance of less domestic spending and more exports and these factors are necessary as part of the rebalancing.
Some suggest this in contrast with reports that employers will be offering salary increases after almost two years of salary freezes this from data supplied by XpertHR.
Most employees are not expecting a pay raise in 2011 and most will not receive one as well, says Sheila Attwood of XpertHR. She also states that after two years of pay freezes workers will not be pleased with continued pay freezes. In 2011 a 2.5% to 3% increase in pay is expected which is below the RPI inflation of almost 5%.