With news that UK unemployment has fallen to an 11-year low, a new report on the labour market warns that while employment growth looks set to continue, real wages are likely to fall in 2017.
The Labour Market Outlook report from the CIPD and Adecco Group reveals that the balance of employers that plan to expand their workforce, as opposed to those that intend to reduce staffing levels, remains in positive territory at +22, although this is down from +27 in the previous quarter.
At the same time, for the second quarter running, employers anticipate median basic pay settlements of just 1.1% for the 12 months ahead against a backdrop of anticipated higher inflation.
Gerwyn Davies, CIPD labour market analyst, said: "Pay expectations are already weak, and as inflation moves up we can expect a period of low or negative real wage growth for the squeezed middle."
The report finds that 30% of employers expect that the UK's vote to leave the EU will increase their costs over the next three months, which, says the CIPD, may explain the continued squeeze on wages and why employers are planning to reduce (15%) rather than increase (9%) investment in skills.
The vast majority of employers don't want and aren't ready for a hard Brexit, the report also finds - just 6% say they are in favour of a hard Brexit. However, although 42% of employers believe that future restrictions on EU labour could damage their UK operations, just 15% have started to prepare for this eventuality.
Davies said: "It seems that few UK employers want or are ready for a hard Brexit outcome, which all the latest political commentary seems to be pointing towards. However, uncertainty over the UK's future arrangements with the EU is no excuse for inaction. From all of the information we have, it's inevitable that there will be restrictions on EU migrant labour after the UK leaves the EU and employers must be prepared for this. It's vital that the UK Government considers making intermediate arrangements when introducing changes to immigration policy."