Against a backdrop of worker shortages, more than half of employers said they expect to raise base or variable pay further in 2023 to better recruit and retain staff, according to the Chartered Institute of Personnel and Development (CIPD), a body representing employers. However, expectations for public sector pay rises are lower.
Employers are also coming under pressure to help workers with the cost of living crisis. Low unemployment has coincided with a period of sustained high inflation prompted by supply chain disruptions and energy price rises, which have been worsened in the last year by Russia’s full-scale invasion of Ukraine.
The UK economy narrowly avoided a technical recession at the end of 2022 as output stayed almost unchanged. However, despite the relative weakness in activity, unemployment remained near record low levels at 3.7% in November, a level that historically has been associated with a tight labour market and pay increases.
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