Tuesday 12 December 2017 10:42 am

UK real wages to drop in 2018 due to Brexit and inflation, report says

A combination of the effects of Brexit and rising inflation will push UK wages down next year, according to new research from US firm Korn Ferry.

A report from the group reveals that, adjusted for inflation, employees in the UK are expected to see a real wage decrease of 0.5 per cent in 2018, compared to an increase of 1.9 per cent this year.

"In contrast to last year, UK workers will find themselves worse off than French and German workers when it comes to salary increases. 2018 is set to be a tough year for UK business. Companies need to think about how they target the limited money they have available for pay increases to the parts of the business where it will have the most impact on employee performance," said Benjamin Frost, Korn Ferry's global general manager – pay.

"Inflation is pinching wages internationally and Brexit elevating levels of uncertainty. UK organisations will be forced to make crucial decisions about where money can be best allocated to boost employee morale and motivation."

This morning, official stats revealed inflation hit 3.1 per cent in November.

The research shows employees in Eastern Europe will see real wages rise by 1.4 per cent next year, while wages for Western European workers will grow by 0.9 per cent.

The highest wage growth will be seen in Asia, Korn Ferry said, with real wages expected to increase by 2.8 per cent. This is down from 4.3 per cent growth last year, but remains the highest globally.

"Slower economic growth in mature economies keeps a check on pay raises,” said said Bob Wesselkamper, Korn Ferry's global head of rewards and benefits solutions.

"In emerging economies, upskilling workers is crucial for companies to maintain a competitive advantage – and those skilled employees can expect to see wages rise as talent shortages in certain regions drive salaries upward."

Meanwhile, in Venezuela, currently in the grips of a spiralling economic crisis, real wages are expected to plummet by 1021.2 per cent next year.