Pay awards at 2.7% may not give true picture of likely demands

British pay awards rose to an average 2.7 per cent in the three months to July from a downwardly revised 2.5 per cent in the three months to June, according to the pay specialists Industrial Relations Services.

However, IRS issued a health warning with the figures, saying that each month's figures were currently liable to distortion because only about one-third of deals usually struck in the period had so far been monitored.

The June number, for example, was provisionally estimated at 2.8 per cent before being revised down. The latest survey monitored 63 deals covering 400,000 employees.

"Does this herald a significant rise in pay expectations in advance of the new [autumn] pay round? The balance of evidence suggests not," IRS said.

It said private sector pay demands were likely to be moderated by the recent turbulence in the stock market. Bigger rises, if they came, were more likely to be in the "cash-rich public sector", it said, where increases averaged 3.5 per cent in the period.

John Butler, an economist at HSBC, added: "The figures might be going up but they are still at a very low levels so they will not have much impact on the outlook for interest rates."

The survey's weighted median, which takes account of the number of employees covered by a wage deal, rose sharply to 4.1 per cent from 3.6 per cent in the three months to June. That was largely because of a deal struck by the supermarket giant Tesco with its 175,000 workers. The award was weighted towards those at the bottom of Tesco's pay scale who won a 4.1 per cent increase.

Pay deals in the service sector averaged 3 per cent during the period while those in manufacturing came in about 2.8 per cent, a narrower gap than in recent months.

Recent official data showed growth in average earnings – which include overtime and bonuses as well as basic pay – ticking up to 3.9 per cent in the three months to June from a year earlier.

Pay has remained relatively steady in Britain in spite of unemployment being close to record lows.