U.K. Hourly Labor Costs Grow at Fastest Pace in Two Years

(Bloomberg) -- U.K. labor costs are rising at their fastest pace in more than two years, figures Friday showed.

The cost of employing someone for an hour of work rose 3.7 percent in the fourth quarter compared with a year earlier, up from 3.1 percent in the previous three months and the most since the July-September period in 2015, the Office for National Statistics said.

U.K. Hourly Labor Costs Grow at Fastest Pace in Two Years

While the increase partly reflects a drop in the number of hours worked in the fourth quarter, firms could face pressure to protect margins by raising prices unless there is a pickup in productivity. From the third quarter, labor costs were up 1 percent.

The government’s fiscal watchdog remained downbeat about productivity in it latest forecasts published Tuesday, predicting output per hour would grow less than 1 percent on average over the next three years.

The increase in labor costs over the past year was driven by non-wage expenses, which jumped by 6.5 percent. That includes national insurance and pension contributions as well as sickness and maternity pay. Wage costs rose by 3.1 percent. Pressures were strongest in the private sector, where labor costs climbed by 4 percent.

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