The Chartered Institute of Personnel and Development (CIPD) has released a new analysis showing that UK workers will not be receiving as much of a salary increase this year as companies are forced to reduce pay increases in the face of ongoing economic difficulties.

The decline in pay growth coincides with a slowdown in GDP, leading many firms in the UK to reduce their hiring as well.

After hovering above 5% for a while, the average future projected income growth in the UK fell to 4% in the last quarter of 2023—the first decline since the start of the Covid-19 pandemic. While the predicted fall in the public sector was greater, going from 5% to 3%, the median expected growth in the private sector demonstrated the same expected decline from 5% to 4%.

Senior labor market economist Jon Boys of CIPD stated, “This feels like a key moment in the UK labor market. The public and private sector gap in pay expectations is widening again, at a time of mounting pressures on public services.”

Experts cautioned that lower pay increases will reduce disposable income at a time when living expenditures are rising, damaging Britons’ purchasing power and forcing many to review their spending plans.

Due to a tight labor market and rising inflation driving up the cost of living, we have witnessed a prolonged era of strong pay growth. Individuals have benefited from pay increaases, but firms now have a larger wage burden to pay for it, according to Boys.

Almost two thousand employers participated in the poll, which was done last month.

10% of firms anticipate layoffs throughout the next three months, compared to about 33% who aim to grow their workforce.