UK workers may not get the pay rise they expect this year thanks to a cocktail of economic risks and policy changes.
Employers planning to award workers a pay rise in the year to March 2017 are looking at a median increase of 1.7 per cent, according to a survey of more than 1,000 employers by the Chartered Institute of Personnel Development, a human resources association.
Since 2010 the median annual pay increase has been static at 2 per cent, official statistics show.
But slumping productivity and inflation, as well as an expanding labour supply, have reduced the economic pressure for employers to pay their staff more.
Added pressure on employers has come from the introduction of the apprenticeship levy and the national living wage, the CIPD said.
Mark Beatson, chief economist of the CIPD, said that the national living wage will result in job losses if the productivity of low-paid employees does not increase.
"Simply making low-paid labour more expensive is not the answer and the Government shouldn’t be surprised if some employers choose easier options, such as reducing hours, chipping away at other benefits or making a less generous pay award the next time pay is reviewed," Beatson said.
He called for the Government to take a more active approach to helping businesses cope with the changes and improvements to their productivity by providing more practical advice and support.
UK economic growth is expected to slow in the UK, according to the Confederation of British Industry.
In a separate report, the CBI said that businesses are holding back on investment plans over the uncertainty over the EU referendum.
Business leaders say that Brexit, combined with persistently low commodity prices and slumping GDP growth, mean that interest rates are not expected to rise until 2017.
