• Annual growth in take home pay accelerates to 4.2 per cent, according to Voca
• Increase in manufacturing sector pay more than doubled

7 March 2007: The Voca take home pay index  shows that growth in take home pay has risen to 4.2 per cent in February (January: 3.3 per cent). This upward trend continues on the back of salary increases negotiated in the current pay settlement round.

The Voca industry sub-index, which reflects take home pay in the manufacturing sector, more than doubled to 3.1 per cent in February from 1.5 per cent in January, the first increase in 7 months.  However, manufacturing is likely to have a challenging 2007, under pressure from the strong pound and world economic slowdown, which will dampen export demand and competitiveness against imported goods.

The Voca services sub-index, which reflects take home pay growth in the services sector, strengthened to 4.9 per cent in February from 4.6 per cent in January.

Richard Cooper, head of marketing and communications at Voca, said:
 “The spending power of the average manufacturing salary has been falling since October, due to high inflation and modest wage increases. However, the growth in manufacturing take home pay leapt in February as workers use pay negotiations to reverse the downward trend seen in recent months.”

Douglas McWilliams, chief executive of cebr, the economics consultancy which analyses the index for Voca, said:
 “The Voca index shows that there is upward pressure on private sector salaries as employees seek to counteract the effects of high inflation in the current wage settlement round. This is in contrast with the public sector where Gordon Brown is seeking to hold wage growth below two per cent.”

 “Clearly, the recent interest rate rises have had an impact and reduced consumer spending. We will now have to wait and see if there is any change in headline inflation.”

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.