UK employers expect to give workers pay rises of 5% this year, the highest in at least a decade, according to a survey of more than 2,000 businesses.

Against a backdrop of worker shortages, more than half of employers said they expect to raise base or variable pay further in 2023 to better recruit and retain staff, according to the Chartered Institute of Personnel and Development (CIPD), a body representing employers. However, expectations for public sector pay rises are lower.

The 5% pay rise expectation was the highest since at least 2012 when the quarterly survey started, the CIPD said. However, 5% would not be enough to prevent a steep real-terms pay cut, with inflation more than double that at 10.5% in December.

The CIPD also reported that employers were struggling to fill vacancies. That is generally another sign of a tight labour market that would ordinarily prompt employers to raise pay offers. Fifty-seven percent of employers said they have hard-to-fill vacancies, and of those, two in five said they would raise wages this year to attract workers.

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