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Prioritise productivity before wages, business groups tell Cameron

Business groups have responded to David Cameron’s call for increased wages with a warning that improving the UK’s productivity levels should be the priority.

The prime minister, speaking at the British Chambers of Commerce annual conference yesterday, called for companies to give workers a pay rise to allow everyone to benefit from economic recovery.

He told business leaders: “Now that your costs are falling and it’s cheaper to do business – I’m confident that more businesses will pass on that good economic news to their workers, in rising pay cheques and higher earnings."

Professional bodies responded that the government should focus on increasing productivity as part of a long-term plan for economic recovery.

CBI deputy director-general Katja Hall said: “As the recovery continues we expect wages to pick up, but this will need to go hand-in-hand with rising productivity. Basing wage increases on temporary market movements seems to be at odds with the long-term economic plan."

CIPD head of public policy Ben Willmott said that while costs are falling and it has become cheaper to do business “productivity growth is still stalling”.

“Simply asking businesses to improve pay, without examining more closely the factors that have contributed to our poor productivity performance fails to address the underlying cause of low wage growth,” he said.

He added that employers are spending less on training than before the recession, and we need to “invest in our human capital” to get the most out of workforces.