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Rising inflation means UK salary increases amongst lowest in Europe next year

Press Release   •   Nov 09, 2016 15:00 GMT

  • Real pay rises in the UK will be 0.3% on average in 2017
  • UK falls 9 places in European rankings
  • Salaries to rise 1.5% on average globally after factoring in inflation
  • Real wage rises in Asia Pacific higher than all other regions

Companies anticipate salaries in the UK will increase by 2.9 per cent on average in 2017, according to the latest Salary Trends survey by ECA International, the world's leading provider of knowledge, information and software for the management and assignment of employees around the world. After factoring in UK inflation, employees based here will experience the third lowest wage increase in Europe next year in ‘real terms’*.

“The sharp fall in the value of the pound since the UK’s Brexit referendum is expected to contribute towards higher living costs in the UK which will see real wage increases fall to just 0.3 per cent next year, compared to the 1.9 per cent wage increases seen in 2016. Inflation is expected to hit 2.5 per cent over the next 12 months in the UK”, said Mark Harrison

ECA's Salary Trends Reports analyse current and projected salary increases for local employees. They provide information on real pay rises by factoring in inflation rates. This year, they are based on information collected from 260multinational companies across 72 countries.

Europe

The UK’s average real wage increase is expected to fall behind the rest of Europe. In 2017, salaries in Europe are expected to rise by 1.3 per cent on average, down from the 1.8 per cent real wage increases seen in 2016.

Russia is forecast to have the largest real wage increase in Europe, ranked 10th in the global rankings with an expected increase of 3 per cent. With inflation expected to fall to 5 per cent next year in Russia, it has meant that Russia climbed 22 places in the regional rankings, the highest climber this survey within Europe.

Ukraine looks set to retain its place at the bottom of the European rankings for real wage increases in 2017. Forecasts for 2017 salary increases here fall below the expected rate of inflation; a real-terms wage decrease is therefore predicted, at -1 per cent. Although likely to remain elevated, inflation is nevertheless expected to decline in 2017 to 11 per cent, slightly reducing upward pressure on wages.

In addition to Russia and Ukraine, Belgium and Norway are the only other locations in Europe where employees will be better off than they were in 2016. Staff based in these locations can expect 0.4 per cent and 0.2 per cent real wage increases respectively in 2017. Falling inflation in these locations is the determining factor behind these positive findings.

Rest of world

According to company predictions from around the globe, nominal wages will rise 5 per cent on average in 2017, slightly up on this year’s 4.8 per cent average. In terms of real salary increases, the global average is forecasted to be 1.5 per cent, which is slightly down on 2016’s average of 1.6 per cent.

Companies in Argentina are forecasting 27 per cent pay rises for staff in 2017. After factoring in Argentina’s inflation, predicted to be 20.5 per cent in 2017, employees will experience the largest global increase in spending power, estimated to be a 6.5 per cent wage increase in real terms. Argentina has seen the largest rise in the ECA Salary Trends global rankings this year, moving up 70 places between 2016 and 2017. President Macri’s election in 2015 brought with it more market-friendly economic policies and support from the Argentinian business community. New investment, alongside an expected significant decline in inflation, could lay the foundations for a better economic future after a long period of instability and uncertainty.

In Canada and the US, companies are predicting 0.9 and 0.7 per cent real wage increases respectively – down on this year’s uplifts. Staff based in the Americas overall can expect to receive 1.6 per cent uplifts in 2017, up from 0.5% in 2016. While employees based in Africa and the Middle East are set to see real wage rises of 0.5 per cent on average. The situation for staff in Egypt has taken a further step in the wrong direction with staff expected to be 8.2% worse off in 2017. The Egyptian government’s plans to cut its total subsidy bill in the coming fiscal year 2016/17 has contributed to the higher inflation forecast for 2017. Fuel subsidies were the hardest hit leading to domestic prices of fuel soaring in Egypt.

On average, real wage increases in Asia Pacific are expected to be 2.6 per cent in 2017, higher than all other regions surveyed. In terms of real salary increases, it is staff in Vietnam that will experience the highest regional and second highest global real wage increase in 2017 at 5.4 per cent. Staff based in Myanmar can expect to be 1.6 per cent worse off in 2017. Despite being forecast nominal salary increases of 7.5 per cent, with inflation forecast at 9.1 per cent, they are the only location in the Asia Pacific region that will see staff worse off in 2017.

In mainland China, companies are planning to award 7 per cent salary increases next year. After inflation is factored in, staff here will see the fourth highest wage increases globally in 2017: they can expect to see increases of 4.7 per cent in real terms. Despite its continued economic slowdown, which is expected to continue in 2017, China’s economy remains the second largest in the world.

After another period of deflation in Japan, the IMF is predicting marginal inflation throughout 2017. The continued oscillation between inflation and deflation suggests that the government’s efforts to raise wages in recent years, to encourage spending, may not be sustainable and Japan should continue to see small salary increases in the foreseeable future. In terms of real wage increases, staff in Japan can expect 1.9% uplifts in 2017, the sixth lowest in the Asia Pacific region.

*’Real terms' refers to wages that have been adjusted for inflation. Forecast inflation rates are based on information from the International Monetary Fund – excluding Argentina. Data via Consensus Economics was used to determine Argentina’s inflation rate.

-ENDS-



Notes to Editors

  • Venezuela and Argentina have been excluded from global averages as they skew the average; their reported nominal salary increases for 2017 were 90 per cent and 27 per cent respectively.
  • Please note that all figures have been rounded to one decimal place

About ECA's Salary Trends Survey

The information above was taken from ECA's Salary Trends Survey 2016/2017. The survey reports current-year salary increases for local national employees and the anticipated increases for reviews in the forthcoming year. It is based on information collected from 260 multinational companies for 72 countries. Reports are available free to all participants or for purchase either as a set or individually per country for non-participants from the ECA website. Further information regarding ECA surveys can also be found on the website.

Data is based on increases including merit. Including merit is the total salary increase and represents general cost of living/inflationary increases plus performance/merit related increases. The data above was collected from August to September 2016. The survey included data from all seniorities across the following industry groups which included Energy, mining & petrochemicals; Chemical & pharmaceutical; Transport & logistics; Manufacturing & consumer goods; Legal & professional services; Engineering & technology; Retail, leisure & other services; Financial services; Non-Profit.

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About ECA International (www.eca-international.com)

ECA International is the market leading provider of knowledge, information and technology that enables businesses to manage their international reward programmes.

Partnering with thousands of clients on every continent, we provide a fully integrated suite of quality data, specialist software, consultancy and training. Our unparalleled insights guide clients as they mobilise their most valuable resource: people.

We make the complex world of international mobility simple, providing clients with the expertise and support they need to make the right decisions - every time.

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