UK pay rises likely to fade fast, thinktank warns

Resolution Foundation says expected inflation rise will quickly see off any real terms pay growth unless productivity increases significantly

Britain's long-awaited pay recovery this year will quickly evaporate in 2016 unless productivity significantly improves, a leading thinktank has warned.

The Resolution Foundation said real-terms pay growth could slow to less than 1% by the end of next year, from around 2.5% at present. That would be its worst-case scenario with productivity growth failing to pick up and inflation taking off more than expected.

Related: UK inflation expected to turn positive