Take home pay growth hits two-year low
- Growth in take home pay halves in just four months, according to Voca
- Pay growth slackens dramatically in manufacturing sector
- Retail sales may suffer due to consumers’ squeezed wallets
5 December 2006: The Voca take home pay index shows that the growth in take home pay has fallen to 2.6 per cent in November from 3.3 per cent in October. This is the lowest level in the index’s two year history and represents a halving of pay growth since its peak in July.
The Voca industry index, which reflects pay growth in the manufacturing sector, fell sharply to 2.7 per cent in November from 4.2 per cent in October. It is the lowest rate since April. The Voca services index, which reflects pay growth in the services sector fell marginally to 2.5 per cent from 2.6 per cent in October. This is its lowest level since September 2004 and follows a sharp decline since June when the growth rate was 5.5 per cent.
Richard Cooper, head of marketing and communications at Voca, said:
“The slowing of take home pay growth points to a slowing of retail spending as we move into 2007. This comes at a time when households face rising borrowing costs and the prospect of an increase in environmental taxes.”
Douglas McWilliams, chief executive of cebr, the economics consultancy which analyses the index for Voca, said:
“The Voca take home pay index shows salary packets after deductions falling for the fourth consecutive month. There has been a sharp fall in pay growth in the manufacturing sector. This supports the current concern in the industry that recent buoyant performance may be suffocated by the strength of the pound, adverse inventory cycles and the world economic slowdown.”
Voca processes over 90 per cent of UK salaries and the Voca take home pay index is the most timely and accurate disposable income data available in the UK. It is based on actual payments made to employees on a three-month moving average compared with the same measure a year earlier. It is affected by changes in tax rates, National Insurance and other employer payments or deductions.
To read the full take home pay index report, please click here.