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UK employees to receive among the lowest salary increases in Europe next year

  • UK professionals expected to receive just 0.2% real-terms salary increase in 2018, up to fifteen times less than European peers
  • Higher inflation to wipe out majority of pay increases
  • In Europe, only employees in Hungary, Portugal and Ukraine are likely to be worse off than those in the UK
  • Real salary increases in Asia-Pacific to continue to lead the world in 2018, filling eight of the top ten positions in the global rankings

According to the latest Salary Trends Report by ECA International (ECA), UK employees in the private sector are expected to see a real salary increase of just 0.2 percent in 2018, the equivalent of approximately £4.41 a month (£53 pa) for the average worker¹ before tax. This keeps the UK at the bottom of the salary increase table in Europe, ranking 23rd out of 26 countries surveyed in the region.

The real salary increase is calculated based on the difference between the forecast nominal salary increase (2.8 percent in the UK) and inflation² (2.6 percent). The latest survey also reveals that employees in the UK received a disappointing 0.1 percent real salary increase this year, lower than forecast in 2016 (0.3 percent), due to a jump in inflation caused by sterling’s fall in value.

“Productivity growth in the UK has remained low in recent years so employers have not been able to offer the level of salary increases that they have been able to in the past. This, combined with higher inflation, which is expected to be 2.6 percent next year, has caused something of a pay crunch for UK workers.”

- Steven Kilfedder, Production Manager at ECA International

ECA is the world’s leading provider of information, software and expertise for the management and assignment of employees around the world. ECA's annual Salary Trends Report analyses current and projected salary increases for local employees in 72 countries across the world. 

Europe sees steady inflation and limited growth

Real salary growth for UK workers is forecast to remain behind most of their European peers. Only employees in Hungary, Poland and Ukraine are anticipated to have lower real salary increases than those in the UK.

Although there are early signs of growth in some major European economies, expected real salary increases still lag behind those of a few years ago. Real wage growth in Germany and France is expected to be less than half the rate of 2015 at 1.2 percent and 0.9 percent respectively.

Despite the lacklustre predictions for 2018, the average rise across the continent is expected to be 1 percent, and for the first time in five years no European nation is expected to experience a salary decrease. Real-terms pay freezes are pushing Ukraine and Portugal to the bottom of the regional rankings.

Russia is forecast to move to the top of the European rankings in 2018. As its economy stabilises and inflation falls, employees in Russia are set to receive a 3.1 percent real salary increase next year.

After seeing the highest real salary increases in Europe in 2017, inflation is expected to move higher in Romania. This will cause the country to see real pay rises of just 0.7 percent next year, compared to 3.4 percent in 2017, and fall 46 places in the global rankings. Ireland and Hungary face a similar situation, falling 18 and 21 places respectively.

Asia-Pacific leads the way

Asia-Pacific countries continue to outperform the rest of the world, occupying eight of the top ten spots in the global rankings with above-inflation salary increases across the board. Despite slower economic growth, China is forecast to rank seventh in the world next year and will maintain its ever-present record in the top ten of ECA’s ranking of global real salary increases. Top spot in the region is taken by India, with a 4.9 percent real salary increase predicted.

Americas show improvement

India is only beaten to the global top spot by Argentina, which is forecast to receive an impressive 7.2 percent real salary increase in 2018.

Kilfedder added, “President Macri’s market-friendly policies are expected to bear fruit in Argentina next year, causing inflation to cool and bringing respite to hard-pressed workers after years of low or negative real salary increases. As a result, Argentina has jumped 22 places in the 2018 global rankings, topping the chart for the highest real salary increase in the world.”

In the Americas, average real salary increases are predicted to be 1.6 percent, slightly higher than in 2017 (1.4 percent). Employees in Mexico in particular look set to benefit from lower inflation in 2018 to record a real-terms increase of 0.8 percent compared to a 1.3 percent pay cut in 2017. Uplifts for the USA and Canada are set to remain steady, at 0.9 and 1.1 percent respectively.

Africa and Middle East affected by inflation

Despite both expecting to see 10 percent nominal salary increases next year, Egypt and Nigeria find themselves at the bottom of the global rankings thanks to high inflation, which will likely far outweigh pay rises and cause real decreases of 11.2 and 4.8 percent respectively. Lower inflation in Ghana will help the country to leap 51 places globally and top the regional rankings for Africa and Middle East, with employees predicted to enjoy a 4.7 percent real pay hike.

The imminent introduction of VAT in the countries of the Gulf Cooperation Council has raised inflation forecasts. Saudi Arabia and Qatar are particularly affected with both anticipated to experience real salary decreases as a result, dropping from among the highest ranked nations in the region in 2017 to the lowest in 2018.

For more information visit www.eca-international.com.

¹ Based on the average salary of £26364 published by the Office for National Statistics.
² Forecast inflation rates are based on information from the International Monetary Fund.

Europe regional rankings for nominal & real wage increases (with global rankings)
 
European rank 2018
Global rank 2018
Countries
Real wage increase
Nominal salary increase
Real wage increase
Nominal salary increase
Russia
1
2
11
15
Bulgaria
2
4
20
42
Switzerland
3
24
33
69
Italy
4
14
34
58
Germany
5
12
35
56
Czech Republic
6
8
37
46
Luxembourg
6
14
37
58
Slovakia
6
8
37
46
Denmark
9
14
40
58
Netherlands
9
14
40
58
Finland
11
20
43
64
Irish Republic
12
14
45
58
France
13
21
48
65
Sweden
14
14
49
58
Poland
15
7
51
45
Austria
16
13
52
57
Norway
17
10
53
54
Belgium
18
21
56
33
Romania
18
3
56
65
Spain
18
21
56
65
Greece
21
26
59
71
Serbia
22
5
60
43
United Kingdom
23
10
61
54
Hungary
24
6
62
44
Portugal
25
24
63
4
Ukraine
25
1
63
69

 

Global top 20 - Real wage increase forecast rankings
 
Global Rank
Countries
Real wage increase 2018
Nominal salary increase 2018
Argentina
1
1
India
2
6
Ghana
3
2
Indonesia
4
9
Vietnam
4
8
Thailand
6
24
China
7
20
Bangladesh
8
7
Pakistan
8
10
Cambodia
10
15
Russia
11
15
Brazil
12
15
Philippines
12
20
Singapore
14
33
Korea Republic
15
29
Taiwan
15
33
Sri Lanka
17
14
Israel
18
46
Morocco
19
33
Bulgaria
20
42
Malaysia
20
23

-ENDS-

Notes to Editors

Rooster will coordinate comment and interview opportunities for Steven Kilfedder, Production Manager at ECA International.

For further press information, please contact:

Yasmine Triana / Aaryn Vaughan / James Brooke
Rooster PR
T: +44 (0)20 3440 8934
E: ECAInternational@rooster.co.uk

About ECA's Salary Trends Survey

The information above was taken from ECA's Salary Trends Survey 2017/2018. The survey reports current-year salary increases for local national employees and the anticipated increases for reviews in the forthcoming year. It is based on information collected from 260 multinational companies for 72 countries. Reports are available free to all participants or for purchase either as a set or individually per country for non-participants from the ECA website. Further information regarding ECA surveys can also be found on the website.

Data is based on increases including merit. Including merit is the total salary increase and represents general cost of living/inflationary increases plus performance/merit related increases. The data above was collected from August to September 2017. The survey included data from all seniorities across the following industry groups which included Energy, mining & petrochemicals; Chemical & pharmaceutical; Transport & logistics; Manufacturing & consumer goods; Legal & professional services; Engineering & technology; Retail, leisure & other services; Financial services; Non-profit.

Follow ECA on twitter: @ECAintl

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