Pay awards show lid is on inflation

Fresh evidence that inflation remains under control and that industrial efficiency is improving emerges today with the publication of the latest figures from CBI's Pay Databank.

Wage awards in the manufacturing and service sectors during the busiest time of the year for pay bargaining showed no signs of edging up as some commentators had predicted.

Settlements in the manufacturing sector averaged 3.6 per cent in the first quarter of the year, the same as in the three months to February. Service sector pay awards declined slightly, to 3.6 per cent compared with 3.8 per cent in the three months ending in February.

In the wake of Labour's victory in Staffordshire East, ministers will take some comfort from data indicating that manufacturing is becoming more efficient. Productivity gains averaged 4.3 per cent in the first quarter of the year against 3.4 per cent in the previous quarter.

The CBI found that a wider range of pay settlements compared with the year ending July 1995. The spread may indicate that companies are increasingly emphasising their own profitability in pay negotiations, rather than any "going rate".

Official figures due on Wednesday are expected to show no change in February in the underlying average earnings figure from 3.25 per cent.

A separate survey of 289,000 company accounts by Dun & Bradstreet reports that during the last three full-years the share of the wage bill in total turnover has climbed significantly from 25.4 per cent to 28.7 per cent.With net profits and dividends also up, the increase has been paid for by efficiency gains.