The index shows that wage growth in the manufacturing sector has dipped sharply, from 4.0% in August to just 3.0% in September, the most dramatic fall since November 2006. The drop could point to the end of a revival in manufacturing wage growth, which peaked at 4.8% in June. These worrying figures show the fragile state of UK industry which is facing a number of difficult challenges including dealing with the negative impact of interest rate rises in the past few months.
"Take home pay has seen a gradual decline in recent months, however, this may be further accelerated through economic slow down. Consumers in general could be in for a bumpy couple of months," says Richard Cooper, head of marketing and communications at VocaLink. "This, combined with a rise in the cost of living, could mean people are more cautious in terms of their spending."
Douglas McWilliams, chief executive of cebr, the economics consultancy which analyses the take home pay index for VocaLink, said: "Wage growth has been slowing for most of this year - averaging just 3.5 per cent from January to September, compared with an average of 4.5% for the same period last year. The current credit crunch further supports the slowdown."
VocaLink processes over 90% of UK salaries and the VocaLink take home pay index is 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 measure a year earlier. It is affected by changes in tax rates, National Insurance and other employer payments or deductions.
