News story

Regulator to investigate wage inflation at request of Secretary of State

Under Section 37 of the Defence Reform Act, the Secretary of State has commissioned the SSRO to carry out research into current and future wage inflation in single source contracts.

As labour is a significant cost in many single source contracts, wage inflation has the potential to be material to the defence budget. The aim of the study is to provide evidence on changes to wage inflation and pay policies to inform how information on wage inflation should be captured and assessed in single source contracts in the future.

The research will assess wage inflation in the context of the defence industry, and in comparison to similar occupations and industries and the wider UK economy, and how this has changed over time. The drivers behind single source wage inflation and changes to pay and wage policies will also be explored. The SSRO may suggest potential improvements to evidence required or guidance provided in this area, and will also look at how the MOD assesses the evidence provided.

The research will involve a review of data and evidence, along with discussions with the MOD and single source defence contractors. We would like to encourage industry stakeholders to take part in this research in order to understand the drivers behind wage inflation and policies. Please contact the SSRO at vfmstudies@ssro.gov.uk if your company is interested in being involved in the study.

An analytical report summarising the SSRO’s findings will be published in summer 2016 in agreement with the Secretary of State.