Take Home Pay Shows Growth for the First Time in Six Months

LONDON -

- The VocaLink Take Home Pay Index Rises by 0.2% to 1.3% - Manufacturing Wage Growth Rose From an All-Time Low of 1.1% in May to hit 1.3% in June - Services Sector Take Home Pay Reversed its Sharp Plunge in May, Growing by 0.2% to 1.2%

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 today.

The VocaLink Take Home Pay Index, released today, shows the first signs of growth in pay levels after six back-to-back months of decline. Having dropped to an all-time low level of 1.1% in May down from 4.3% in June last year, the latest figures in pay growth show a slight improvement to 1.3%. This upward trend was mirrored in the services and manufacturing sectors which both showed a slight increase.

There are two key reasons attributed to the reversal of the steady decrease in pay growth reported on in the last six months. The first is that economic sentiment has turned upwards in the last three months leading to employers improving their pay settlements. Secondly, June is the first month after the traditional financial sector bonuses quarter meaning that the sharp decline in bank bonuses this year, which had a massive impact on the previous three months of data, had less impact on this month’s index.

Moving out of the financial services bonuses period explains why the services sector pay growth increased from 1.0% in May to 1.2%. However, it is still considerably down from the 4.6% level of June 2008 and should be treated with caution.

The manufacturing sector experienced a modest increase from 1.1% in May to 1.3% in June. It shows that sentiment in the manufacturing sector is improving slightly suggesting that contraction is abating and pointing towards further improvements in coming months.

Mark Chapman, marketing director at VocaLink, said: “Although we can take encouragement from this month’s rise in pay growth, it must be stressed that this increase is modest. To put it into context, in June last year pay growth was at 4.3%.”

Commenting on the latest data, Douglas McWilliams, chief executive of economics consultancy cebr, said: “The weak growth seen within the VocaLink Take Home Pay Index supports our view that there will be no change in interest rates until at least the first quarter of 2010. This view is supported by the very low levels of wage growth and lack of inflationary pressure.”

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.

Follow this link to read the full statistical report ( www.vocalink.com/SiteCollectionDocuments/VocaLink%20Take%20Home%20Pay%20Index%20Report_May.pdf)

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 2008 2009 Month Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun % % % % % % % % % % % % % VocaLink take home pay index 4.3 4.5 4.1 4.0 3.4 3.5 2.9 2.7 2.4 2.0 1.6 1.1 1.3 VocaLink manufacturing index 3.9 5.4 4.3 3.1 2.4 2.3 2.4 1.4 1.5 1.2 1.4 1.1 1.3 VocaLink services 4.6 3.8 3.9 4.3 4.1 3.9 3.0 3.1 2.9 2.4 1.7 1.0 1.2 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 provider of transaction services to banks, their corporate customers and Government departments. It processes domestic and international automated payments and provides ATM switching solutions. On a peak day, the VocaLink automated payment platform processes over 90 million transactions and over half a billion in a month. Its switching platform connects the world’s busiest ATM network of over 60,000 ATMs. Its Real-Time Payments platform provides the central infrastructure for the UK Faster Payments service. VocaLink is working with BGC (Bankgirocentralen) to provide outsourced processing for the majority of Sweden’s domestic payments.

Having pioneered electronic payments over 40 years ago, many of the world’s top banks and their corporate customers have grown to rely on VocaLink to meet their transaction needs. Its processing services offer banks reach throughout the Single Euro Payments Area (SEPA) and beyond; and are complemented by value-added services that leverage industry expertise and technical capabilities.

Please visit www.vocalink.com for more information

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.

Source: VocaLink

For further information, please contact: Scott McLean, Hotwire, +44(0)29-7608-2500 or vocalinkuk at hotwirepr.com; Deborah Souter, VocaLink Limited, +44(0)870-920-8651 or deborah.souter at VocaLink.com. If you would like to receive the monthly press release please e-mail vocalinkuk at hotwirepr.com or deborah.souter at VocaLink.com