The VocaLink take home pay index shows slight growth as Christmas approaches

3 December 2008

The VocaLink take home pay index increased for the first time in three months to 3.5 per cent in November from 3.4 per cent in October. Wage growth is typically quite resilient in a downturn, particularly when starting from low levels as employees strongly resist falling pay in cash terms.

The VocaLink manufacturing sector sub index showed a fourth consecutive monthly decline, falling to 2.3%. Despite the drop in the value of sterling, weak markets at home and abroad have sent the industry sector into recession. Take home pay growth in the service sector also edged down reaching 3.9 per cent in November from 4.1 per cent in October.

Richard Cooper, marketing director at VocaLink, said, “Since March the VocaLink take home pay index has become increasingly aligned to the retail sales index. With consumers finding it harder to obtain credit, it remains to be seen if VAT cuts along with price deflation will boost retail spending in the run up to Christmas.”

Commenting on the latest VocaLink take home pay index, Douglas McWilliams, chief executive of economics consultancy cebr, said, “With the manufacturing industry already in recession we now see the service sector contracting as a result of the pressure on UK household finances. The service sector has been the engine of UK growth over the past ten years, but the credit crunch is pushing it into recession.”

VocaLink processes over 90% of UK salaries and the VocaLink 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.

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