Wage increases are predicted to rise by 1.7% in 2014, taking it above the 1.6% forecast for inflation. The report also suggests unemployment in the UK will fall from its current rate of 7.2% to 6.5% by the end of 2014, and 6% by the end of 2015. This would make the UK the country with the highest proportion of employment of all the G7 nations.
The report predicts GDP will grow by 2.9% this year and 2.3% in 2015. EY ITEM Club chief economic adviser Peter Spencer characterised the overall economic picture as "steady as she goes."
On the increase in wages, Spencer warned that growth in the workplace will temper wage inflation.
"But not to the extent of impeding a recovery in real wages," he said.
EY chief economist Mark Gregory predicted inflation will remain subdued. He added that emerging pressures on wages and talent mean it is vital that companies have the right people and resources in the right places to take advantage of growth opportunities.
"The companies that get these basics right will have significant opportunities," he said. "Exporters can capitalise on China’s growing demand for branded consumer goods, while business-to-business suppliers should benefit from rising business investment."