Businesses ignore pay restraint plea

Only a "handful" of firms have agreed pay deals below the rate of inflation, according to a report today that shows that the Government's warning on pay restraint is being ignored.

Only a "handful" of firms have agreed pay deals below the rate of inflation, according to a report today that shows that the Government's warning on pay restraint is being ignored.

A list of wage settlements shows that pay deals in sectors such as telecoms and computer services are running at about 6 per cent - with rises of 10 per cent for key staff.

The report, from employment analysts Incomes Data Services, also says the 11 per cent pay deal at Ford has set as an "influential benchmark".

IDS's statistics show that in the six months to October, when inflation ran at between 1.1 and 1.3 per cent, only 16 out of 258 firms - settled at below 2 per cent. But it said there were a significant number of high settlements in recent months, driven by increased productivity and concerns over skills shortage. "Many settlements continue to give rises in the 2.5 to 4 per cent range, well ahead of inflation," it said.

Hewlett-Packard, the computer group, awarded its 3,500 workers a merit-based 6.1 per cent deal, while Syntegra's 1,500 workforce got 5.5 per cent. GEC-Marconi Avionics, which employs 17,000, has agreed 4.6 per cent, again on merit.

The deals will alarm the Bank of England, which is worried that a tight labour market and skills shortages are driving up pay. The Chancellor used his pre-Budget report to warn employers not to give excessive pay deals that would lead to higher interest rates.

Ford last week handed out the first phase of its three-year deal that will see average pay rise 11 per cent but the working week cut by 90 minutes.