Research by Willis Towers Watson predicts that UK workers will receive an average pay rise of 3 per cent in 2020, although higher expected inflation compared to 2019 will result in a real terms increase of just 1 per cent. The Willis Towers Watson Salary Budget Planning Report is a global study of how businesses expect to increase their overall salary budgets. The results represent a fall in real wage growth in the UK compared to 2019, when salaries rose on average by 1.2 per cent. 

Real wage growth in the UK over the next 12 months will also be lower when compared to the predicted European average of 1.1 per cent for the same period, and lower than 13 other economies across the continent. Topping the tables across Europe, Ireland (1.9 per cent), Malta (1.9 per cent), Luxembourg (1.7 per cent), Romania (1.6 per cent) and Denmark (1.6 per cent) are set for the fastest growth in salary increases. In contrast, forecasts for Lithuania (0.5 per cent), Slovenia (0.5 per cent) and Belgium (0.6 per cent) expect the slowest real wage growth in 2020. 

“The UK unemployment rate last year fell back to its lowest level since 1975, which you would normally expect to give workers stronger bargaining power,” said Keith Coull, director of global data services at Willis Towers Watson. “Pay is still increasing in real terms, but this growth and the demand for new workers have both slowed down, partly due to economic uncertainty surrounding the country as it steps into its non-EU future.

“Low unemployment in the UK labour market has also intensified the war on talent, making it harder for firms to find the skills they need,” he added. “Companies will need to think carefully about how they develop pay and reward programmes if they are to attract and retain scarce talent in this competitive environment. Our research shows that the ability to impact on the organisation’s performance and the opportunity to take part in interesting and challenging work now rank higher than pay. A ‘race to the top’ strategy offering higher and higher salaries is no longer an option.”