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07 July 2015

TAKE HOME PAY INDEX H1 2015 Review Jan - Jun THPI

 
Deborah Souter,
Head of Content,
VocaLink

2015 v 2010 post-election Budgets. VocaLink Take Home Pay Index shows 3.7 percentage point increase in growth rate of real pay

  • Large increase in growth rate of real take home pay leading up to 8 July 2015 post-election budget, compared to 22 June 2010 post-election budget
  • The growth rate of real take home pay in May 2015 stood at +1.6%, compared to -2.1% in May 2010

7 July 2015. In advance of the 8 July Budget, research from VocaLink, which processes 90% of UK salary payments, shows the growth rate of take home pay in real terms has increased by 3.7 percentage points over the past five years. 

Figures from today have been compared with 2010, which was the last time there was a Budget following an election.

Table 1: Change in percentage point growth rate of real take home monthly pay: 2010 v 2015

 

Mar- May 2010

Mar- May 2015

Percentage point change over five years

Nominal growth in take home pay of FTSE 350 companies

+0.5%

+ 1.9%

+ 1.4%

CPIH inflation

+2.6%

+ 0.3%

-2.3%

Real growth in take home pay of FTSE 350 companies

-2.1%

+ 1.6%

+3.7%

Service Sector sees greatest change in rate of growth of real pay

In May 2015, the previous quarter’s growth saw a year-on-year increase in the Service Sector in real take home pay of 1.7%, Manufacturing 0.4%, and Public Sector 0.8%. 

By contrast, the previous quarter to May 2010, annual growth in real Service Sector take home pay was - 2.3%, Manufacturing – 0.4% and Public Sector -1.3%.

Despite the significant change in the rate of growth of pay, real take home pay still remains below 2010 levels.

Table 2: Real take home monthly pay: 2010 v 2015 (at 2010 prices)

 

Mar- May 2010

Mar- May 2015

Percentage change in real take home pay over 5 years

FTSE 350

£1,583

£1,571

-0.8%

Manufacturing

£1,861

£1,877

+0.9%

Services

£1,548

£1,534

-1.0%

Public Sector

£1,710

£1,584

-7.4%

Manufacturing and Services take home pay are constituents of FTSE 350 take home pay

Recent trend shows significant recovery of Public Sector wage growth over six months

The rate of growth of FTSE 350 real take home pay over the past six months increased from 1.0 % in November 2014 to 1.6% for the period quarter to May 2015. 

The rate of growth of Public Sector real take home pay has increased from -0.5% in November 2014 to 0.8% for the period quarter to May 2015.

Paul Stoddart, Managing Director at VocaLink, said: “A 3.7% swing in real earnings growth reflects the very different state of the UK economy in 2015 compared to 2010, during the height of the financial crisis. However, it is important to note that lower inflation is the most important factor in this swing. 2015 real take home pay is still, with the exception of manufacturing, not back at 2010 levels. 

“However, real pay in Services – the UK’s largest sector - is now growing fastest out of all sectors.  Given that services pay can be seen as a bellwether for the state of the UK economy this is encouraging news in advance of the 2015 emergency budget.” 

Click here to download the full report  

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