The level of salary increase is in line with other countries in Western European and North America. However the report found in the UK inflation remains high, with an anticipated 2.7% rise in the cost of living, which is significantly higher then anywhere else in the region.
"Signs of a UK economic recovery give private sector organisations the confidence to maintain their 2014 pay budgets above the forecasted inflation rate," said Paul Richards, head of Towers Watson's data services practice in EMEA.
The biannual Salary Budget Planningreport found the difference between the UK's expected wage increases and inflation was the smallest in Western Europe, at just 0.3%.
In Germany, France and the Netherlands, where wages are expected to rise between 2.8% and 3% next year, inflation is predicted to be at least 1% below that at 1.8%, according to Towers Watson.
The report argued that, despite often large variations in predicted wage increases, real income improvements were quite similar across the globe as inflation rates closely tracked pay rises in the major economies.
Chris Charman, director at Towers Watson UK rewards practice, said: "When budgets are lower the impact that companies can have on employee's wage increases is limited.
"In these instances companies prefer to distribute a large proportion of their pay budgets among their most valued employees in an effort to keep them engaged and motivated."
