Salary pressures near record high as companies compete for workers

Salary  London, UK. 03rd Jan, 2023. London commuters make their way to the office across London Bridge on their first day back to work in 2023, avoiding train strikes which are causing widespread disruption across the country and millions of people have been advised to avoid rail travel. 03rd January, 2023, City of London, England, UK Credit: Jeff Gilbert/Alamy Live News
Salary pressures remained close to record-high levels. Photo: Jeff Gilbert/Alamy Live News

The number of UK sectors reporting growth more than doubled in December as salary pressures remain at near record levels.

Seven of the 14 sectors monitored by the Lloyds Bank UK Sector Tracker reported growth compared with just three in November – the December highest growth month since June 2022.

Salary pressures remained close to record-high levels (3.87 times the long-term average), amid continued competition for workers.

However, overall UK economic activity saw a slight contraction with a reading of 49.

A reading above 50.0 on the tracker indicates expansion, while a reading below 50.0 indicates contraction.

The contraction on November was more pronounced at 48.2.

Jeavon Lolay, head of economics and market insight at Lloyds Bank Corporate and Institutional Banking, said: “While the economy held up better than expected in recent months, the impact of temporary boosts such as the World Cup and first Covid-19 restriction-free Christmas for three years is evident. The mixed performance across UK sectors is likely to remain a rolling theme in 2023 as the strains from rising prices and higher interest rates impact both households and firms disproportionately.

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“Still, further evidence of a broad softening of inflationary headwinds is welcome, as in large part this reflects the continuing normalisation of supply chain conditions for many sectors. How quickly this is reflected in firms’ output prices and then consumer prices will be watched closely.”

Software services firms (56.8 vs. 47.5 in November) and automotive manufacturers (53.1 vs. 38.0 in November) posted the fastest rises in activity. The tourism and recreation sector (50.2 against 44.6 in the previous month) – which includes pubs, hotels and restaurants – also saw output grow, supported by the World Cup.

Scott Barton, managing director at Lloyds Bank Corporate and Institutional Banking, added: “Despite December data showing a marginal increase in activity in some sectors, this month’s broader data illustrates that the current trading environment remains fragile.”

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“As companies begin their operations in 2023, it will be important to stay focused on the fundamentals. Through consistent and comprehensive forecasting, analysing performance data, and closely managing supply chains and inventory, businesses can establish a strong foundation to successfully navigate the challenges that lie ahead.”

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