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Deflation will keep pay down, says CIPD

19/05/2009

The Chartered Institute of Personnel and Development has warned that the UK's negative inflation will contribute to a pay freeze.

According to today's Retail Prices Index (RPI), the average costs of selected goods and services has fallen by 1.2 per cent.

This, says John Philpott, the organisation's chief economist, will reduce the growth in annual earnings to two per cent or less.

Because 80 per cent of employers use RPI as a benchmark for assessing the current cost of living and unemployment is on the rise, "the ongoing squeeze on pay is set to continue, particularly in the private sector", Mr Philpott observed.

The Office for National Statistics noted that a large downward pressure from house depreciation, rent, council tax and dwelling insurance has helped drive inflation into negative figures.

Another significant influence has been the Bank of England's decision to cut interest rates, as this has reduced monthly payments to many banks.

 

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