LONDON: British employers expect to raise wages by around 3% over the next year, though some anticipate that artificial intelligence could lead to workforce reductions, according to a new survey highlighting business concerns over the government’s tax policies and their potential impact on hiring.
The Chartered Institute of Personnel and Development (CIPD), the professional body for HR practitioners, reported that hiring intentions are near their weakest levels since the pandemic, with the public sector showing particularly low recruitment activity.
The survey found that one in six employers expect AI tools to enable them to cut staff within the next 12 months. Among those, a quarter foresee headcount reductions of more than 10%, primarily affecting junior managerial, clerical, administrative, and professional roles.
The CIPD urged finance minister Rachel Reeves to avoid additional measures that could discourage hiring in her upcoming November 26 budget, following last year’s sharp increase in employer social security contributions.
James Cockett, senior labour market economist at the CIPD, said jobseekers are already experiencing the effects of slower recruitment since Reeves’ first budget. He stressed the need for government and employers to focus on long-term workforce planning and invest in upskilling to help workers adapt to the growing use of AI or transition into new roles.
Across the more than 2,000 businesses surveyed, the median expected basic pay increase remained at 3%, unchanged for six consecutive quarters.
A separate Bank of England survey released on Thursday showed employers’ expectations for wage growth rose slightly to 3.7% in the three months to October, the highest level in five months. Official data due Tuesday is expected to show a modest slowdown in wage growth, with economists forecasting regular pay in the three months to September up 4.6% annually, compared with 4.7% in the previous month.
While the Bank of England kept interest rates at 4% last week and signaled a possible rate cut at its December meeting, policymakers remain cautious about wage growth pressures that could fuel inflation.
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