Pay awards have shrunk, says CBI

PAY SETTLEMENTS have declined in manufacturing and services, according to a new survey published today.

The Confederation of British Industry, which has been emphasising the absence of inflation pressures in the economy, said the average settlement in manufacturing was 2.8 per cent in the three months to April, down from 2.9 per cent in the last quarter and 3.5 per cent a year earlier. In services the average fell to 3.4 per cent, down from 3.8 per cent in the three months to January.

Kate Barker, the CBI's chief economist, said: "It is no surprise to see settlements falling in manufacturing given the number of job losses the sector has suffered. However, it is encouraging news for inflation that settlements are also declining in the service sector."

She said the results of the quarterly survey showed the Monetary Policy Committee had been right to cut interest rates.

It showed increasing pressure on manufacturers to keep down pay awards because they cannot pass on higher costs. Nearly half of the companies responding said their inability to raise prices had limited pay deals.

This was a sharp contrast with the service sector companies, only 17 per cent of which said they could not recoup costs in price increases.

Only 28 per cent of manufacturers said the cost of living had been pushing pay up, compared with 39 per cent a year ago. There was also some indication that skills shortages were easing in industry.

In services, however, 37 per cent said the need to recruit and retain workers was a significant pressure pushing wages and salaries up. This was slightly lower than the 40 per cent making the same complaint a year earlier.

A separate report today from Incomes Data Services says the introduction of the National Minimum Wage has boosted pay at the bottom of the scale in fast food outlets and pubs. For example, McDonalds raised its provincial rate for over-18s by 10p to pounds 3.60 an hour. And Wolverhampton & Dudley increased its minimum rate by 14 per cent to pounds 3.60.

Such moves took average pay in the sector up by between 2 per cent and 9 per cent, with most falling in the 3.0-3.5 per cent range.

Salaries for professionals continue to remain buoyant. Newly qualified accountants joining financial services companies earn an average of pounds 26,000 in the regions and pounds 38,000 in London, according to a survey by Michael Page Finance.