VocaLink Take Home pay Index Shows Wage Growth Plummet in the Manufacturing Sector

LONDON -

- The VocaLink Take Home Pay Index However Remains Steady at 1.3% Annual Wage Growth

- Manufacturing Pay Growth Slumps to an All-time Low of Just 0.5% in July From 1.3% in June

- Services Sector Take Home Pay Continues Modest Month-on-month Rise

The VocaLink Take Home Pay Index remained unchanged in July at 1.3% following June’s reported first rise in wage growth for six months. However, the ongoing problems in the manufacturing sector were reflected in the dramatic fall in pay growth from 1.3% in June to just 0.5% in July. In contrast, the service sector continued to show a gradual improvement increasing by 0.7% to 1.9%.

The manufacturing sub-index showed annual wage growth plummet to 0.5% in July. This follows the modest increase from 1.1% in May to 1.3% in June, ending hopes that last month’s rise was a sign that pay growth in this sector was improving. The data shows that there are still considerable difficulties being experienced in the sector with weak domestic and foreign demand causing ongoing pay freezes and wage cuts.

The service sub-index continued to increase gradually from 1.2% in June to 1.9% in July. As with last month, this can be partly attributed to the end of financial services bonuses season which, due to the much lower pay-outs this year, had a major impact on total service sector wage growth in the first half of the year.

Mark Chapman, marketing director at VocaLink, said: “The continued slight rise in the service sector helped the VocaLink Take Home Pay Index remain static this month. However with the dire state of wage decline in the manufacturing sector, there is no sign we will see a strong recovery in overall wage growth any time soon.”

Commenting on the latest data, Douglas McWilliams, chief executive of economics consultancy cebr, said: “Such a low level of wage growth demonstrates the lack of inflationary pressure in the United Kingdom economy. We believe this data will encourage the Bank of England to extend quantitative easing to the full GBP150bn at the August meeting. This may further boost lending and asset prices.”

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 6 August 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 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul % % % % % % % % % % % % % VocaLink Take Home Pay Index 4.5 4.1 4.0 3.4 3.5 2.9 2.7 2.4 2.0 1.6 1.1 1.3 1.3 VocaLink Manufacturing Sub-Index 5.4 4.3 3.1 2.4 2.3 2.4 1.4 1.5 1.2 1.4 1.1 1.3 0.5 VocaLink Services 3.8 3.9 4.3 4.1 3.9 3.0 3.1 2.9 2.4 1.7 1.0 1.2 1.9 Sub-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)20-7608-2500 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