VocaLink Take Home Pay Index Starts on Road to Recovery Following All-time Low
LONDON, April 8, 2010 /PRNewswire/ --
- The VocaLink Take Home Pay Index recovers from its lowest level on record of 1.0 per cent in February to reach 1.5 per cent in March
- A strong rebound in manufacturing sector pay growth takes the VocaLink manufacturing index to 1.3 per cent in March from 0.4 per cent in February
- Services sector pay growth records a more modest improvement in March as the VocaLink services index rises to 1.5 per cent from 1.3 per cent in February
The VocaLink Take Home Pay Index for March has recovered from its all-time low in February to record a rise of 0.5 percentage points, bringing the index to 1.5 per cent. The rise has been significantly aided by a strong rebound in manufacturing sector pay growth which increased by 0.9 percentage points in March. However, even though the economic recovery is underway, there is still significant spare capacity in the economy. As a result, since March last year, the VocaLink Take Home Pay Index has stabilised between a 1.0 per cent and 2.0 per cent range, which is significantly lower than the 4.0 per cent pre-recession average.
As regards to manufacturing, the VocaLink index rebounded sharply in March to 1.3 per cent from its record low level of 0.4 per cent in February. This index now stands at the average level experienced in 2009, though still significantly lower than the 3.2 per cent average level of 2008. Much of this recent improvement in the manufacturing sector is due to the turning inventory cycle, which is expected to provide a boost to overall economic growth in the first quarter of this year. However, it is unclear whether this rise in manufacturing output will be temporary or sustained.
Meanwhile, the VocaLink services index edged up by 0.2 percentage points to 1.5 per cent in March. Despite being above the VocaLink manufacturing index, the services index remains a full two percentage points below its average level over the past five years of 3.5 per cent. The main reason for this relative underperformance is the excess capacity in the economy.
Marion King, Chief Executive Officer at VocaLink, said: "Arguably, UK employers are using wages, instead of employment, to control costs much more so than in the past. As a result, wage growth remains at a structurally lower level; this trend is set to continue throughout 2010 as employers put off making long-term decisions around raising employment and/or wages."
Douglas McWilliams, chief executive of economics consultancy cebr, said: "While the rise in March's VocaLink Take Home Pay Index is a large move relative to the level of the index, it acts to merely take the index to the midpoint of the 1.0 per cent to 2.0 per cent range that it has been fluctuating in since March 2009. It is clear that wage growth will continue to remain at historically depressed levels until upward pressures emerge from significant rises in employment."
VocaLink processes over 90% of UK salaries and the VocaLink Take Home Pay Index, established in 2004, provides 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 continuation measure a year earlier. It is affected by changes in tax rates, National Insurance and other employer payments or deductions.
Note to Editors:
The VocaLink Take Home Pay Index is an important aspect of the UK's economic performance and one of the components that drives the Bank of England's Monetary Policy Committee's (MPC) interest rate policy due to be announced on Thursday 8 April 2010.
Follow this link to read the full report, available from Thursday 8 April 2010
http://www.vocalink.com/thpi0410rep
Methodological notes
The average payment per employee is estimated from the total value of payments and the number of transactions and then expressed as an index for each month. The data uses a 3-month moving average to mitigate seasonal variations and looks at the year on year increase to provide a fair economic indicator that is also comparable with other data.
While the FTSE 350 sample is largely representative of the corporate economy in the UK, when comparing the VocaLink take home pay index data with, for example, government statistics, it is important to take into account the fact that some trends, which affect relatively larger firms differently, may have a disproportionate impact on the VocaLink take home pay index compared with the government's official Average Earnings Index (AEI). For example, the VocaLink index does not include the public sector so when pay trends in the public sector are different from those in the private sector, this will affect the VocaLink index differently from the AEI.
The VocaLink Take Home Pay Index is based on take home pay data. It is therefore affected by changes in tax rates, changes in National Insurance contribution rates and changes in other employer payments or deductions. It is therefore a more representative indicator of disposable income for salary earners than data that does not take this into account.
The VocaLink Take Home Pay Index series
Three month average annual change
Year 2009 2010
Month Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
% % % % % % % % % % % % %
VocaLink Take Home 2.0 1.6 1.1 1.3 1.3 2.0 1.7 1.7 1.4 1.9 1.4 1.0 1.5
Pay Index
VocaLink 1.2 1.4 1.1 1.3 0.5 0.8 0.9 1.5 2.0 2.0 1.1 0.4 1.3
manufacturing
index
VocaLink services 2.4 1.7 1.0 1.2 1.9 2.8 2.1 1.8 0.9 1.7 1.6 1.3 1.5
index
About the VocaLink Take Home Pay Index
The VocaLink Take Home Pay Index tracks monthly take home pay levels in the UK. VocaLink is the processor for automated payments in the UK on behalf of Bacs, the UK body responsible for clearing and settlement. This includes all Direct Debit and Bacs Direct Credits, which account for over 90% of salary payments delivered into employees' bank accounts. The VocaLink Take Home Pay Index is compiled using the data captured from the salary payments of 100 of the FTSE 350 companies.
VocaLink works with the centre for economics and business research (cebr) to deliver the analysis of this powerful and timely indicator of take home pay inflation to economists, analysts and the media. It is an important aspect of the UK's economic performance and one of the components that drives the Bank of England's Monetary Policy Committee's (MPC) interest rate policy. The VocaLink Take Home Pay Index is also split by broad sector group into two sub-indices - the VocaLink Industry Index and the VocaLink Services Index.
About VocaLink
VocaLink is a specialist payments partner to banks, their corporate customers and government departments.
We design and deliver smarter domestic and international automated payments systems, and smarter ATM switching solutions.
In fact, our switching platform connects over 60,000 ATMs, the world's busiest network, while our payments platform processes over 500 million payments per month.
Having pioneered electronic payments for over 40 years it's perhaps no surprise that many major organisations have come to rely on our services.
For example, our Real-time Payments Platform is the central infrastructure for the UK's Faster Payments Service, whilst we've partnered with BGC, Sweden's leading payments provider, who now outsource the majority of Sweden's domestic payments to us.
We are very proud of our service delivery record. Our platforms operate on never-fail technology to ensure total reliability and availability 24 hours a day allowing us to meet our customer needs.
In short, our smarter payments capabilities offer banks, corporates and government departments reach throughout SEPA and beyond.
VocaLink. Safer payments, smarter partner.
About cebr
Centre for Economics and Business Research ltd is an independent consultancy with a reputation for sound business advice based on thorough and insightful research.
Since 1992, cebr has been at the forefront of business and public interest research. Providing analysis, forecasts and strategic advice to major UK and multinational companies, financial institutions, government departments and agencies, trade bodies and the European Commission.
Cebr is recognised as one of the country's leading independent commentators on economics and business trends. Its forecasts are used by a diverse audience of business people, policy makers and journalists; even the Treasury publishes its predictions for the UK economy.
For further information, please contact:
Suzanne Hewitt, Hotwire
+44-(0)20-7608-2500 or [email protected]
Deborah Souter, VocaLink Limited
+44-(0)870-920-8651 or [email protected]
If you would like to receive the monthly press release please e-mail
[email protected] or [email protected]
SOURCE VocaLink
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