Vocalink

• The VocaLink Take Home Pay Index falls by 0.4 percentage points in February to reach its lowest level on record of 1.0% - less than half of its value from the same month a year ago
• The VocaLink manufacturing index plummets sharply for the second consecutive month, losing 0.7 percentage points in February to hit an all-time low of 0.4%
• The VocaLink services index loses 0.3 percentage points in February dropping to 1.3%.

London, 4 March 2010: The VocaLink Take Home Pay Index for February has continued January's downward spiral to hit an all-time low of 1.0%. The combination of the two recent consecutive falls has nearly halved the index during that period, taking it from 1.9% in December to 1.0% in February, signifying the Index's lowest level since its inception in September 2004. A slower than expected recovery in manufacturing production has contributed to the significant decrease in the VocaLink manufacturing index which also fell to its lowest level on record by tumbling from 1.1% in January to 0.4% in February. Services sector pay growth followed the downward trend with the index recording a drop of 0.3 percentage points to reach 1.3% in February.  Though the reduction is relatively modest, a fall of this size is still significant given the index's current low level.

The bleak news reflects the fragile state of the labour market which is showing few signs of recovery.

The latest official labour market statistics show that unemployment rose in January offsetting the falls seen in November and December. Specifically, the claimant count measure of unemployment increased by 23,500 in January from December which represents its biggest monthly increase since July 2009. The current doubts around economic recovery are exacerbated by the uncertainty caused by the impending General Election with employers waiting to see what fiscal policies are put in place by the new government before making significant decisions regarding employment and compensation.

Marion King, Chief Executive Officer at VocaLink, said: "The fact that the VocaLink Take Home Pay Index has reached the lowest level in its history reflects the gravity of the current economic situation. The Index has now fallen below the previous low of 1.1% reached in May of last year when we were still in the depths of the recession. This continued fall in wage growth rates combined with rising inflation means that household finances are still under great pressure. Either the recovery will have to strengthen significantly or it will take a long period of slow growth before upward pressure on wages begins to build and the spending power of households begins to recover."

Douglas McWilliams, chief executive of economics consultancy cebr, said: "The slower than expected recovery - official statistics for the fourth quarter of 2009 show only a 0.3% quarter on quarter growth compared with 1.4% for the United States - leaves the UK labour market in a weak state overall. The slack in the economy, caused by the sluggish recovery and already depressed productivity levels, is allowing firms to accommodate the modest increases in output demanded without leading to significant rises in employment or wage levels as reflected in the latest VocaLink Take Home Pay Index."

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