The latest findings from the VocaLink Take Home Pay Index reflect the economic optimism in the UK, showing the fastest growth experienced in the private sector since August 2012. Workers in this sector saw annual growth of 2.1% in the three months to June – up from 1.8% growth in the three months to May. Service sector workers have gained particular benefit from these early signs of economic confidence, with the VocaLink Services Sector Take Home Pay Index showing the strongest annual growth since August 2012, with take home pay 2.1% higher in the three months to June than a year ago.
This rise in take home pay growth comes against a backdrop of improved confidence around the UK’s economic prospects. The Office for National Statistics’ (ONS) third estimate of GDP for the first quarter of 2013, for example, confirmed that the UK economy grew at a quarter-on-quarter rate of 0.3% in the first three months of the year.
However, pressures on the manufacturing industry and public sector mean these indices do not yet reflect this general economic strength. The VocaLink Manufacturing Sector Take Home Pay Index shows slowed annual growth, with 2.5% annual growth in the three months to June, down from 3.5% in the three months to April.
The VocaLink Public Sector Take Home Pay Index continues to struggle, reflecting a six month trend of take home pay decline. The sector has suffered from negative annual take home pay growth for three consecutive months now, with annual take home pay growth of -0.1% in the three months to June. This is the result of public sector pay freezes, which continue to impact workers in this sector.
Commenting on this month’s findings, David Yates, Chief Executive Officer at VocaLink, said: “It is encouraging to see the VocaLink Take Home Pay Index demonstrate strength in the UK economy this month, with convincing take home pay growth in both the FTSE 350 and services sectors. The savings ratio fell to 4.2% in Q1 2013 – the weakest savings rate in four years and combining this drop in saving figures with the improved ONS GDP estimate, it is fair to assume that workers are starting to feel more confident spending their wages now. However the manufacturing and public sector statistics do highlight the need for some caution.”
Douglas McWilliams, Chief Executive of Cebr, said: “Despite evidence of economic improvement in the UK, I would reiterate the need for consumers and businesses to remain cautious. The Consumer Price Index (CPI) measure of inflation rose to 2.7% in May – a return to trend after a seven-month low of 2.4% in April. This reflects the ongoing rise in prices across public transport, utilities, tuition fees, cigarettes and alcohol – and directly impacts how far workers’ wages go.”
For further information and a copy of the report please visit VocaLink’s website.