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UK forecast for dip in real wage growth in 2020 despite record high employment

UK workers are due to get an average pay rise of 3% in 2020, although higher expected inflation compared to 2019 will result in a real terms increase of just 1%

Compensation Strategy & Design|Executive Compensation|Future of Work|Health and Benefits|Inclusion and Diversity|Talent
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By Andrew Collis | January 13, 2020

LONDON, 14 January, 2020 — UK workers are due to get an average pay rise of 3% in 2020, although higher expected inflation compared to 2019 will result in a real terms increase of just 1%, according to research by Willis Towers Watson.

According to Willis Towers Watson’s Salary Budget Planning Report, a global study of how businesses expect to increase their overall salary budgets, this represents a fall in real wage growth in the UK compared to 2019, when salaries rose on average by 1.2%.

Real wage growth in the UK over the next 12 months will also be lower when compared to the predicted European average of 1.1% for the same period, and lower than 13 other economies across the continent. Topping the tables across Europe, Ireland (1.9%), Malta (1.9%), Luxembourg (1.7%), Romania (1.6%) and Denmark (1.6%) are set for the fastest growth in salary increases. In contrast, forecasts for Lithuania (0.5%), Slovenia (0.5%) and Belgium (0.6%) expect the slowest real wage growth in 2020.

2019 2020
Salary budget inflation real terms Salary budget inflation real terms
UK 3.0 1.8 1.2 3.0 2.0 1.0
EU28 Average 2.9 1.9 1.0 2.9 1.8 1.1

*All figures given as a percentage. The data uses median statistics and excludes salary freezes.

“The UK unemployment rate last year fell back to its lowest level since 1975, which you would normally expect to give workers stronger bargaining power,” said Keith Coull, Director of Global Data Services at Willis Towers Watson. “Pay is still increasing in real terms, but this growth and the demand for new workers have both slowed down, partly due to economic uncertainty surrounding the country as it steps into its non-EU future.

Companies will need to think carefully about how they develop pay and reward programmes if they are to attract and retain scarce talent in this competitive environment,”

Keith Coull,
Director of Global Data Services at at Willis Towers Watson.

“Low unemployment in the UK labour market has also intensified the war on talent, making it harder for firms to find the skills they need. Companies will need to think carefully about how they develop pay and reward programmes if they are to attract and retain scarce talent in this competitive environment. Our research shows that the ability to impact on the organisation’s performance and the opportunity to take part in interesting and challenging work now rank higher than pay. A ‘race to the top’ strategy offering higher and higher salaries is no longer an option.”


About the report

The Salary Budget Planning Report is compiled by Willis Towers Watson’s Data Services Practice. The survey was conducted online in June/July 2019 amongst companies participating in Willis Towers Watson's compensation surveys across the Europe, Middle East and Africa region. We received over 9,000 sets of responses covering 74 countries worldwide.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving in more than 140 countries and markets. We design and deliver solutions that manage risk, optimise benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential.

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