By Daniel Hunter

The VocaLink FTSE 350 Take Home Pay Index stands at 1.8% during the three months to April 2012, only marginally improving from 1.7% in the three months to March.

Despite the increase in the tax-free Personal Allowance, which rose by £630 to £8,105 this government financial year, the VocaLink Index shows that underlying pay growth remains very weak. Although this month’s private sector take home pay growth rate is in line with the rate seen in February, it remains below levels seen over much of 2011.

Public sector pay growth drops to a low of 1.0%, the lowest growth that the sector has seen in the history of the Take Home Pay Index, largely influenced by ongoing pay freezes affecting the sector. Annual growth on the VocaLink Services Index also remains subdued, standing at 1.5% in the three months to April.

In comparison, the Manufacturing Index continues to experience strong take home pay, with year on year growth of 3.9% during the three months to April. This is up from 3.7% annual growth for the three months to March and the second consecutive month of improving growth.

Annual pay growth for the Manufacturing Index is now well above the level of 0.8% seen in April 2011. The manufacturing sector is experiencing high productivity growth compared to the rest of the UK economy, increasing the value of workers within the sector and helping contribute to wage increases.

“Given the news in recent weeks that the UK has officially re-entered recession, it is perhaps unsurprising to see sluggish pay growth across several of the VocaLink Take Home Pay indices," David Yates, Chief Executive Officer at VocaLink, said.

"It seems important, however, to focus on the positives. The Manufacturing Index is experiencing significantly stronger pay growth than it was in April last year, and this is testament to the high productivity rates seen in this area. There has been debate in recent days as to whether this manufacturing productivity rate is sustainable, so it will be interesting to monitor this in coming months.”

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