Pay deals fall despite climbing inflation

18-05-2007

Pay deals fall despite climbing inflation
Growth in average pay deals slowed to three per cent in the three months to the end of April, in an indication that rising inflation has not sent wages spiralling.

The modest increase followed the eight-year high of 3.5 per cent for the first quarter of 2007 which was reported in a previous study by pay experts Industrial Relations Services (IRS).

During the three months to April public sector wage increases hit their lowest level for nine years - rising by just 2.7 per cent.

Those employed in the public sector are set for a further squeeze over the next year, with chancellor Gordon Brown having announced his intention to limit pay increases for government employees to 1.9 per cent.

Workers in the private sector also saw their pay increase, with one in four wage deals reached in the sector worth more than four per cent.

Of 184 pay settlements examined by IRS, 141 represented an increase in basic pay.

"The first evidence of the April pay bargaining round suggests a departure from the high pattern of pay awards in January, with low pay deals in the public sector matched by a greater number of moderate private-sector settlements,'' said IRS spokeswoman Sarah Welfare.

The figures are likely to ease pressure on the Bank of England to introduce further interest rate rises in order to curb inflation and keep pay rises in check.

Rates were increased by a quarter point to 5.5 per cent on May 10th.
The bank's governor Mervyn King said this week that while it was "too early" to conclude that the danger of spiralling wage growth had passed, developments were "more encouraging".



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