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Pay deals stable but inflation threat remains

Pay settlements in the private sector were stable in January but rising inflation will increase pressure on earnings, according to a new report.

The highest pay rises were in the aerospace and defence sectors, while lower increases were recorded in the food and drink and in the retail sectors.

Pay freezes and pay rises of between 2 and 2.99 per cent made up a similar proportion of new settlements between November and January, according to pay experts Incomes Data Services.

However, the firm warned of the effects of rising inflation on settlements in April, the next key month for pay reviews.

Ken Mulkearn, editor of IDS Pay Report, said: ‘Our analysis of basic pay settlements shows broadly stable, though modest, growth. If the economy recovers we would expect earnings to rise, even if some pay freezes continue.

‘Inflation, which has risen sharply to stand at 3.7 per cent in the year to January 2010 on the all-items measure, will produce another upward pressure on earnings, through its influence on pay setting.’

The study found that firms, feeling the effects of the recession, paid lower increases than they did at the same time a year ago.

19/03/10