Bonus Cuts Reduce Take Home Pay Growth to a Record Low

LONDON - VocaLink Take Home Pay Index Drops to 2.0% in March

- Manufacturing Wage Growth Plummets to an all Time low of Just 1.2%

- Service Sector Take Home Pay Falls to 2.4% in March From 2.9% in February

The VocaLink take home pay index has fallen for the fourth consecutive month in March to an all time low of 2.0%. This is a result of bonus payments being slashed in the face of the recession, while falling inflation and the sustained weakness of the economy have continued to remove the pressure on wage growth.

The decline in take home pay growth in March has been driven by falls in both the manufacturing and service sector sub-indices. Manufacturing wage growth dropped to an all time low of 1.2% as struggling UK manufacturers reduce employment and implement pay freezes or cuts. Take home pay growth in the service sector also continued its downward trend falling close to an all time low at 2.4% from 2.9% in February.

Helen Ritchie, marketing director at VocaLink, said, “The VocaLink take home pay index shows the impact lower bonuses, particularly those in the financial sector, are having on wage growth, sending average earnings to record lows. This will further the decline in consumer prices over 2009, adding to the risk of long term deflation and reducing the likelihood of a quick recovery in the economy.”

Commenting on the latest VocaLink take home pay index, Douglas McWilliams, chief executive of economics consultancy cebr, said, “With further steep falls in business and household expenditure expected and pay growth in continued decline, long term deflation is now a real concern. This supports the Bank of England’s case for quantitative easing to keep inflation from falling below the target range as interest rate policy has effectively been employed to its upmost.”

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 measure a year earlier. It is affected by changes in tax rates, National Insurance and other employer payments or deductions.

The VocaLink take home pay index series Three month average annual change Year 2008 2009 Month Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar % % % % % % % % % % % % % VocaLink 3.6 4.2 4.1 4.3 4.5 4.1 4.0 3.4 3.5 2.9 2.7 2.4 2.0 take home pay index VocaLink 2.4 2.4 2.9 3.9 5.4 4.3 3.1 2.4 2.3 2.4 1.4 1.5 1.2 industry index VocaLink 4.2 5.2 4.8 4.6 3.8 3.9 4.3 4.1 3.9 3.0 3.1 2.9 2.4 services Index

About the VocaLink take home pay index

The VocaLink take home pay index tracks monthly take-home pay levels in the UK. It is compiled from the salary payments of a sample of FTSE 350 companies, using data captured by VocaLink which process all automated payments in the UK including Bacs Direct Credits and Direct Debits. VocaLink works with the centre for economics and business research (cebr) to deliver economists, analysts and the media with a powerful and timely indicator of pay inflation, which is an important aspect of the UK’s economic performance and one of the components that drives the Monetary Policy Committee’s interest rate policy.

Notes to Editors

For further information or to receive the full report please contact: Gerald Cross at The JJ Group +44(0)1865-343100 or vocalink@thejjgroup.com Deborah Souter at VocaLink +44(0)870-920-8651 or deborah.souter@vocalink.com

Source: VocaLink

For further information or to receive the full report please contact: Gerald Cross at The JJ Groupm +44(0)1865-343100 or vocalink at thejjgroup.com. Deborah Souter at VocaLinkm +44(0)870-920-8651 or deborah.souter at vocalink.com