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LONDON (Reuters) – British employers expect to raise pay for their workers only a little despite strong demand for staff and already low unemployment, according to an industry survey that suggested no immediate respite for the country’s squeezed households.

The Chartered Institute for Personnel and Development said its gauge of pay intentions for the private and public sector rose 2 percent in the latest quarter from 1 percent previously.

CIPD said planned pay rises in the private sector were clustering around 2 percent, the median for the last five years.

Last week the Bank of England raised interest rates for the first time since 2007 and predicted wage growth will pick up next year to 3 percent, up from a range of 1.8 to 2.2 percent seen in recent months.

But CIPD said 38 percent of private sector firms faced no pressure at all to raise wages for the majority of their workforce, compared with only 24 percent that said they did.

The squeeze on household incomes from high inflation and weak wage growth was a big factor behind the slowdown in Britain’s economy in the first half of 2017.

A separate survey from payments company Visa on Monday showed British shoppers reined in their spending by the most in more than four years in October.

“Over time we might expect low unemployment levels to lead to increased pressure on pay, as the Bank of England has predicted,” Gerwyn Davies, CIPD senior labour market analyst, said.

“However, it’s the UK’s ongoing poor productivity growth that’s currently preventing employers from paying more, not their inability to find or retain staff.”

Last month, Britain’s official budget watchdog said it expects to “significantly” downgrade its forecasts for productivity growth in the next five years, something that could hurt the government’s finances.

There was better news for public sector workers. CIPD said 59 percent of public sector employers reported pressure to hike salaries for most staff, most of whom are subject to a long-standing pay cap for state workers that may soon be ditched.

Prime Minister Theresa May has eased seven years of public sector pay caps modestly and for police and prison guards.

Finance minister Philip Hammond is under pressure to relax pay constraints further in his annual budget on Nov. 22.

CIPD said its gauge of employment demand eased only slightly from the previous quarter and remained near record high levels.

Official labour market data due on Wednesday is expected to show the unemployment rate will stay at a four-decade low of 4.3 percent, but with no improvement in wage growth, according to a Reuters poll of economists.

CIPD’s survey was based on 2,007 employers and was conducted between Sept. 11 and Oct. 3.

Source: UK Reuters

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