BUSINESS LIVE: Wages up 7.8%; Rolls-Royce slashes headcount; SJP charging model shake-up

Brits were offered some much-needed relief today as official figures showed that wages are finally growing faster than inflation for the first time in almost two years, suggesting the cost of living crisis may be starting to ease.

Average regular earnings increased 7.8 per cent in the three months to August and lifted 0.7 per cent after taking Consumer Prices Index inflation into account, according to the Office for National Statistics.

This is the first time pay has overtaken price increases since October 2021, during the Covid-19 pandemic.

Richard Carter, head of fixed interest research at Quilter Cheviot:

‘Despite the current pause in rate rises, businesses will still be finding the going very tough. As a result of higher interest rates it may lead to a plateauing of wage growth, given that businesses will not have the surplus funds to sanction significant salary increases.

‘Furthermore, with the continued financial uncertainty, employees might tread cautiously when it comes to negotiating for pay hikes for fear of becoming too expensive to keep on.

‘Similarly, businesses could opt to stay lean and not take on too many more staff with future economic uncertainty still prevalent reducing the number of roles available.

‘Therefore, despite the positive momentum in wages over the past year, a deceleration seems likely in the near future.

‘All eyes will be on next week’s data and not only will the unemployment rate be closely watched, but it is also hoped that the percentage of those economically inactive will have seen a further reduction.

‘If this is the case, it would come as a real positive for the government as it continues to try and help encourage people back to work. However, in light of the cost-of-living crisis, this may end up happening naturally in the coming months as belts have to tighten.’

Emma Mogford, fund manager of the Premier Miton Monthly Income fund:

‘With the number of employees on payroll falling and wage inflation below expectations, this gives the Bank of England more reason to pause its interest rate increases.

‘If we are at peak rates, then a more stable outlook for interest rates could help the economy and stock market.’

St. James’s Place has confirmed planned changes to its fee structure aimed at reducing overall ongoing charges for existing client investments across core products.

Britain’s largest wealth manager has been under pressure from regulators to overhaul the way it charges clients to comply with UK’s new Consumer Duty rules, which has weighed on the FTSE 100 firm’s shares.

Last week, it had said it was working with regulators and evaluating options in response to the rules set out by the country’s finance watchdog, which seeks to draw a line under retail mis-selling scandals going back to the 1980s, from endowment mortgages to pensions and payment protection insurance.

The changes to fees, which will come into effect during the second half of 2025, will see an initial charge and ongoing charges applicable from the outset, and without any early withdrawal charges for the vast majority of new investment bonds and pensions, St. James’s Place said in a statement.

Rolls-Royce will cut up to 2,500 roles as part of its new chief executive’s plan to build a more efficient business in a wider turnaround strategy.

Rolls-Royce, whose engines and systems are used on the Airbus A350 and Boeing 787 as well as ships, submarines and in power generation, has been through multiple restructurings over the last decade, including one in 2020 aimed at surviving the pandemic which resulted in 9,000 job cuts.

Tufan Erginbilgic, chief executive, said:

‘We are building a Rolls-Royce that is fit for the future. That means a more streamlined and efficient organisation that will deliver for our customers, partners and shareholders.

‘Our business is full of committed, talented people and I believe these changes will enable them to build greater capability in areas that are key to our long-term success.

‘This is another step on our multi-year transformation journey to build a high performing, competitive, resilient and growing Rolls-Royce.’

UK workers’ wages before bonuses were 7.8 per cent higher year-on-year in the three months to the end of August, in-line with expectations, as pay growth finally begins to slow from record highs in the previous quarter.