Following what was the largest recession on record, the UK economy has seen faster than anticipated growth in 2021. The effectiveness of the Covid-19 vaccine roll-out, combined with consumers’ and businesses’ surprising degree of adaptability to public health restrictions, has seen output recover faster than projected, boosting tax revenues in the process. It was anticipated that the economy would grow by 6.5% in 2021, and a further 6% in 2022.
However, the strength of the rebound in demand in the UK (and internationally) has resulted in supply constraints in several markets. These supply bottlenecks have been exacerbated by changes in the migration and trading regimes following Brexit. Energy prices have soared, labour shortages have emerged in some occupations, and there have been blockages in some supply chains, causing shortages and prices increases. These can be expected to hold back output growth in 2022, while continuing to raise prices and put pressure on wages.
The implications for inflation are significant – both Consumer Price Index (CPI) and Retail Prices Index (RPI) inflation forecasts for 2022 have been upgraded (with forecasts for CPI peaking at 4.4% in the second quarter of 2022) and inflation is not expected to return to target levels until 2024 at the earliest. Indeed, greater pressure in product markets and a tighter labour market could feasibly see inflation levels increase to the highest rate seen in the UK for three decades.
Unsurprisingly, this backdrop will likely increase the pressure on wages across the economy, with more than three quarters of private sector employers planning to increase pay for the 12 months to September 2022 and the government following suit for the majority of public sector jobs by lifting the pay freeze in place since 2020. The median projected pay awards for 2022 are 2.5%, marking a return to pre-pandemic levels.
We are recommending a pay award of 3% for all bands in 2022. While the recommended award marks a notable increase on the previous years’ it is intended to reflect the increase in the cost of living and to ensure salaries remain competitive in what will be a highly pressurised labour market.
The amount paid in recognition of GMA qualifications should increase to £675 per band to ensure that training and professional development remain a priority during this time of economic and social upheaval.
Downloads
2022 GMA Salary Recommendations
2022 GMA Job Descriptions