Take Home Pay Growth on the VocaLink FTSE 350 Manufacturing Index Outpaces Services Sector for First Time since November 2010

London - 10 November 2011

• Annual growth of the VocaLink FTSE 350 Take Home Pay Index rises to 2.5% for the three months to October, up from 2.2% for the three months to September

• The VocaLink Manufacturing Index jumps to 2.7% for the three months to October, up from 2.1% for the three months to September and the highest growth since July 2010

• Three month annual growth on the VocaLink Services Index increases from 2.3% for the three months to September to reach 2.5% for the three months to October

• The VocaLink Public Sector Index rises for the third consecutive month to stand at 2.2%


Private sector take home pay growth, as measured by the VocaLink Take Home Pay Index, has strengthened this month, following a period of falling growth. Three month annual growth on the VocaLink FTSE 350 Take Home Pay Index has risen to 2.5% for the three months to October, up from 2.2% for the three months to September. Growth has picked up particularly strongly in the manufacturing sector which has seen the strongest growth since July 2010 and has outpaced the services sector for the first time since November 2010. The underperformance of the services sector relative to manufacturing may be a reflection of the tough conditions UK business and financial services companies have faced amidst the Eurozone crisis and ongoing market volatility, which may be mirrored in pay agreements.

On the VocaLink Public Sector Index, pay growth remains lower than in the private sector, but it has increased for the third consecutive month in a row to 2.2%. This is despite the April 2011 pay freeze. This upswing may be a reflection of the fact that some workers such as police officers and teachers in England and Wales had their pay rises honoured up to September 2011. It may also be due to public sector workers on relatively low incomes losing their jobs, therefore skewing the average take home pay.


Overall, VocaLink’s October Index shows that take home pay growth remains elevated compared with most of 2009 and 2010. However, growth is still very modest in comparison to pre-recession levels. What’s more, retail price (RPI) inflation hit 5.6% in September 2011 amidst rising utility prices – its highest rate in over 20 years.. In addition, the UK economy has grown by just 0.5% compared with a year ago. As such, sluggish economic growth and high inflation combined with relatively weak take home pay growth means that consumers will continue to experience prolonged and substantial erosion in their purchasing power.

Commenting on this month’s findings, Marion King, Chief Executive Officer at VocaLink, said:
“It’s encouraging to see increasing pay growth on both the VocaLink FTSE 350 Index and Public Sector Index this month. However, with RPI inflation at its highest rate for over 20 years, and with economic growth slow and expected to remain that way, it is likely that this month’s spike in manufacturing pay growth will be short-lived and the ongoing squeeze on consumers will continue well into 2012.”

Douglas McWilliams, Chief Executive of economics consultancy Cebr, said:
“Despite stronger growth in take home pay for the manufacturing sector this month, this could recede again towards the end of the year. The economic crisis in the Eurozone poses a significant threat to manufacturing exports. What’s more the Markit/CIPs Purchasing Manager’s Index for manufacturing sector stands at 47.4 in October, sharply down from 50.8 in September and pointing towards contraction.”

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development