Pay deals 'stable' but sectors vary

AVERAGE pay deals have remained "stable" in recent months, although settlements in manufacturing firms are increasing in the wake of rising inflation, a new study has found.

Average awards remained at 2.4 per cent in the final few months of 2010, but more than a third of increases in manufacturing were worth 4 per cent or more, said pay analysts IDS. An early look at deals in January showed higher pay rises, with just two of 25 awards monitored worth less than 2 per cent.

"Inflation looks set to increase further in the coming months as the VAT rise which took effect at the start of the year comes into the inflation figures, and this could be further fuelled by continued increases in oil prices," the report said.

"With increased media focus on inflation and pay, employees are more aware than ever of the gap between pay settlement levels and RPI, and are likely to put pressure on union negotiators to make up some of this ground in pay negotiations."

Ken Mulkearn, of IDS, said: "The squeeze in incomes resulting from the rise in inflation means that in many parts of the private sector, employees are looking for wage rises to compensate them for cuts in real take-home pay.

"Our latest figures show evidence of this in manufacturing in particular."

"It's a very different picture for the public sector, where a two-year pay freeze is taking hold against a backdrop of startling job cuts."

In the year to December, RPI inflation was at 4.8 per cent, up from 4.7 per cent in November, while CPI inflation - the Government's target measure - increased from 3.3 to 3.7 per cent.