If you have a pay claim coming up and want advice on inflation, and stuff like that…. good luck!
Firstly, the official, current inflation figures have not been as flimsy a guide as they are at the moment for a very long time – so now may not be a time for too much number-crunching. This is because there is so much uncertainty around prices this winter. Currently, RPI is 4.8% in August – up from 3.8% in July – and CPI rose from 2.0% to 3.2% in the same period.
Inflation could be at significantly high levels (5%+!). The current Bank of England view is that CPI will pass 4% or even 4.5% in November/December before falling away slightly with RPI running a point or so higher, though there’s not a consensus on that at the moment, everyone seems very worried and the bets are piling in on interest rate rises [£].
LRD’s Fact Service is reporting that levels of pay are growing with estimated pay-growth, year-on-year to September of 5.2% (comparing Feb 2020 and September 2021, it is 7.5%). I’ve no reason to doubt these figures but I can’t find the source – the ONS figures that I found still indicated strong wage-growth though, and they have a good blog post from July on how the pandemic has impacted the average weekly earnings data. However, we need to take all of this with a large pinch of salt as IPSE are saying that the self-employed are slashing rates to chase a shrinking pool of work, and CIPD say that the wage figures are probably inflated by temporary worker’s wages.
The budget is in a couple of weeks – 27th October – and we should be getting some useful Office for Budget Responsibility (OBR) forecasts around that time – once the chancellor has spoken. Prospect’s research department does a useful overview including OBR projections once they’re available so we should be able to advise a bit more at that point.
However, one very significant price increase we are expecting in April is going to be the increase to the energy price cap which is going to be very high – possibly a double-digit increase. So fuel prices will be rising in the spring.
We’re also seeing a lot of speculation that the budget is going to feature tax increases, along with some significant cuts (and a cut in public expenditure invariably means an increase in personal costs).
Also, another factor: I did something about the labour market earlier today – here. But for anyone thinking about pay-levels at the moment, the takeaway from that is that the UK’s biggest problem (as has been the case for a long time) is productivity – that any wage rises that come from a government policy to pay more to get out of the tight labour market aren’t going to be matched by productivity.
Because of this (some basic economic orthodoxy here) prices will go up faster than wages – so wage increases will be wiped out by inflation which means in a tight labour market, wage demands will increase.
In the industry we know best, the labour market shortages in film and TV aren’t going to simply be resolved by paying more. They may make it harder for lower-budget productions to get the crew, but the hard brake on productivity is always going to be a labour pool that isn’t big enough to meet demand.
The OBR forecasts will give us a lot more to go on at the end of this month, so more then, I hope.