The unions and management at Skoda Auto, the largest Czech automaker, seem on course for a big pay rise disagreement that may be part of an outbreak of such confrontations throughout industry in the country,  with workers determined to land double-digit pay rises amid the country's surging economic success. Analysts have argued that Czechia risks losing one of its key competitive advantages among foreign investors should wages keep rising at a fast clip.

On November 10, Skoda Auto labour leader Jaroslav Povsik was reported by financial daily Hospodarske noviny as saying that the 2018 wage offer received from bosses was like a piece of litter someone had thrown to the ground.

Czech industry is facing an acute shortage of workers amid all-time low unemployment of 3.6%.  Despite annual inflation in Czechia only running at 2.9% (although that is a five-year high), Povsik has said that if workers at the Volkswagen-owned automotive producer fail to secure a pay rise of more than 10% they should be ashamed of themselves.

The unions at Skoda Auto have, meanwhile, stated their objections to a management plan to bring in staggered weekend shifts for around 16,000 workers. The shifts would mean each worker only having a free weekend only once every 13 weeks, they say.

The automaker has been expanding at such a quick rate that VW, which is dealing with anxieties among its workforce and management that the Czech subsidiary has started cannibalising potential Volkswagen sales, has admitted that it has mulled transferring some Skoda production to Germany.

The heat on companies to agree substantial pay rises in the coming months was lately increased by Josef Stredula, president of the Czech-Moravian Confederation of Trade Unions, who commented that the percentage increase next year at many companies would be double-digit.

Czech GDP is growing at a faster rate than that of any other EU member state, with the second quarter producing expansion of 4.7% y/y.

Higher disposable incomes from big pay hikes already agreed, such as a minimum 10% deal for public sector wages announced in September, are driving inflationary pressures.

In response, the Czech National Bank (CNB) has become the only central bank throughout the EU to push through two interest rate hikes within this year, with the main rate now standing at 0.50%. Opinion among analysts is divided as to whether the regulator will introduce a third hike this year when the CNB monetary policy committee meets again in December, but the inflation rate confirmed for October has made it more likely.