VocaLink Take Home Pay Index Shows Greatest Rise in 18 Months

LONDON -

- The VocaLink Take Home Pay Index Rises Sharply to 2.0% Annual Wage Growth

- Services Sector pay Growth has Third Month-on-Month Increase, Leaping to 2.8% in August

- Manufacturing Take Home pay Growth Edges up 0.3% but Remains Weak at 0.8%

The VocaLink Take Home Pay Index rose by 0.7% to show 2.0% annual wage growth in August, the greatest one-month increase since February 2007. The figures are now back to the same levels seen in March this year, when the VocaLink Take Home Pay Index was in the midst of a six-month cycle of steadily falling wage growth. Economists see this turnaround of wage growth as an indication that the UK may be pulling out of recession.

Leading the rise was the services sector with the sub-index increasing sharply by 0.9% to 2.8% wage growth in August. It is now clear that the collapse of the financial services bonus payouts, which are traditionally made in the first few months of the year, was a significant contributor to the steady six month fall of the VocaLink Take Home Pay Index which bottomed out in May at 1.1% annual pay growth.

However, in contrast to the services sector, the manufacturing sector sub-index remained weak with a low 0.3% increase to just 0.8% pay growth. This is the second lowest recorded annual wage growth for the manufacturing sector and underlines the difficulties manufacturers are still facing, resulting in ongoing pay freezes and wage cuts.

Mark Chapman, marketing director at VocaLink, said: “While the VocaLink Take Home Index has shown its greatest rise in 18 months, overall 2.0% is still low and highlights the fact that underlying earnings growth is generally weak. This is exacerbated by the extremely weak manufacturing wage growth which, if it carries on as expected, will continue to dampen down overall pay growth figures.”

Douglas McWilliams, chief executive of economics consultancy, cebr, said: “Although the VocaLink Take Home Index shows an increase in wage growth, these weak levels will have major implications for inflation and inflation expectations. As such we expect the Bank of England to be able to continue its unprecedented quantitative easing policy. We do not expect interest rates to rise nor quantitative easing to be unwound until late 2010.”

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.

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 on Thursday 10 September 2009.

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 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug % % % % % % % % % % % % % VocaLink Take Home Pay Index 4.1 4.0 3.4 3.5 2.9 2.7 2.4 2.0 1.6 1.1 1.3 1.3 2.0 VocaLink manufacturing sub-index 4.3 3.1 2.4 2.3 2.4 1.4 1.5 1.2 1.4 1.1 1.3 0.5 0.8 VocaLink Services Sub-index 3.9 4.3 4.1 3.9 3.0 3.1 2.9 2.4 1.7 1.0 1.2 1.9 2.8

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 payment 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.

LONDON, September 7 /PRNewswire/ –

Source: VocaLink Limited

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