VocaLink research: Pay levels fall in private sector but grow in public sector

Pay levels in the private sector have fallen for the third consecutive month, while public sector pay levels have seen their highest growth this year, according to the VocaLink take-home pay index.

Take-home pay in the private sector fell from 2.7% in August to 2.2% in September, while take-home pay in the public sector increased to reach 2%.

While overall take-home pay growth for the private and public sectors is above the levels seen throughout most of 2009 and 2010, pay growth is still lower than in 2008 when levels stood above 3%.

Across the manufacturing and services sector, which make up the VocaLink FTSE 350 Index, take-home pay growth is low. For the services sector, it is unchanged this month and across the manufacturing sector it has seen a drop of 0.4% to reach 2.3% annual growth.

Marion King, chief executive officer at VocaLink, said: “The gap between private and public sector take-home pay is narrowing this month.

“Digging a little deeper into the numbers, it is likely that private sector pay has been propped up by the April tax reform and, despite a modest improvement this year, public sector pay growth still remains the lowest of all the VocaLink take-home pay sectors. As such, underlying take-home pay growth is still very weak and consumer spending is being affected.”

Douglas McWilliams, chief executive of the Centre for Economics and Business Research (CEBR), added: “This month’s slowdown in private sector pay is in line with the ongoing concerns about the strength of the economy.

“High unemployment rates and the ongoing sovereign debt crisis in the Eurozone risks triggering a double-dip recession.

“Unless economic conditions show signs of improving, employees will not see their pay packets getting any bigger in the coming months.”

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