UK salaries are forecast to increase by 1.3% in 2024 in real terms as UK businesses expect to repeat a higher than usual nominal pay increase of 5%, according to the latest annual Salary Trends Report by global mobility expert, ECA International (ECA).
This equates to an average salary boost of £447 - the highest real-terms increase since the 1.7% received in 2020 – should inflation drop to 3.7% as anticipated.
The UK ranks 28th globally and 7th in Europe for real-terms salary increases forecasted next year, outpacing the expected average global rise of 1.0%.
ECA has conducted its Salary Trends Report for 23 years and analyses data from over 360 multinational companies in 68 countries. Real salary increases are calculated by subtracting the relevant inflation percentage from the nominal salary percentage increase forecasted by businesses in each country.
Oliver Browne, Remuneration and Policy Surveys Manager at ECA International, explained: “UK workers have had a difficult few years, with the economic impact of the Covid-19 pandemic immediately followed by the surge in inflation after Russia's invasion of Ukraine wiping out any real-terms gains of their pay increases. Now that inflation is finally expected to fall below 4%, employees in the UK should be able to look forward to their first real-terms pay increase since 2020.”
While inflation in the UK is falling more slowly than the likes of Germany, Switzerland and Italy, the nominal salary increase forecasted by businesses in the UK is higher, causing the UK to overtake them in rank for real salary increases next year. Real salaries in the UK are anticipated to outperform those in many other European countries, rising 0.4% higher than the 0.9% European average.
Browne added: “With inflation so high, many businesses in the UK have been unable to offer their employees pay awards to match. Nominal increases are expected to remain higher than usual next year despite falling inflation, suggesting some companies may instead be spreading larger increases over a longer period.”
Despite falling rates of inflation, Europe is expected to continue to trail behind the rest of the world for real-terms pay increases at 0.9% on average, compared to Asia-Pacific’s forecasted 2.2% average increase. Employees in Europe are forecast to receive the lowest global nominal pay increase on average next year.
In real terms, UK salaries fell by 1.3% less than the 4% drop forecasted for 2023 (-2.7%). This is a result of lower than expected inflation of 7.7% compared to the 9% forecasted, while UK businesses implemented a 5% average nominal salary increase – the highest since ECA’s survey began 23 years ago.
However, inflation in the UK remained significantly higher than the European average of 6%, causing employees in the UK to experience a worse real-terms salary decrease than the region’s average of -1.9%.