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Take home pay grows slower in 2007

Take-home pay in Britain grew at its slowest rate for two years during 2007, rising by only 3.5%, according to end-of-year figures. VocaLink, which processes 90% of UK salaries, said the rise was well down on the increase of 4.1% in 2006 and of 4.6% in 2005.

Richard Cooper, head of brand and communications, said: “The VocaLink take-home pay index annual figure for 2007 reflects the year’s turbulent economic state. “This climate looks set to continue into the new year as the global credit crunch, rising energy prices and a cooling housing market take their toll.”

The annual rate at which take-home pay is increasing edged up slightly during the three months to the end of December to 3.4%, compared with 3.2% in the three months to the end of November.

The rise was mainly driven by the manufacturing sector. Workers at these firms received an average of 3.3% more pay in December compared with a year earlier, up from an annual growth rate of 2.9% in November. It was the first time the rate had increased for manufacturing since June, when it peaked at 4.8%.

The rate at which pay is rising for people in the services sector remained unchanged during December at 3.3%.

Douglas McWilliams, chief executive of economics consultancy cebr, which analyses the index for VocaLink, said: “Last month, the Bank of England cut interest rates in order to reassure financial markets and the consumer. With 2007 showing the lowest growth in take-home pay for two years, we believe the Bank of England will cut interest rates again in the first quarter of 2008, to help the indebted consumer.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .