Average pay settlements in private sector edge down to 2.5%

There is little sign of inflation pressures from private sector workers, according to a survey published today, which showed the level of the average pay award has fallen this year in all but one of 16 key industrial sub-sectors.

There is little sign of inflation pressures from private sector workers, according to a survey published today, which showed the level of the average pay award has fallen this year in all but one of 16 key industrial sub-sectors.

In the year to August, private sector pay awards as a whole edged downwards from 3 per cent in September last year to 2.5 per cent by the end of the bargaining year, Industrial Relations Services said in its annual review.

And in a marked contrast to the current disputes across the public sector, there seemed little sign of an imminent jump in awards.

IRS said that the downward drift in settlements reflects a combination of weak corporate profitability, sluggish economic growth and a low inflationary environment.

The only sector to see pay inflation was construction where the average award hit 5 per cent – the highest across the private sector by a large margin and for the third year in a row – compared with 4.5 per cent a year earlier. The housing boom has triggered widespread shortages of skilled workers, which has forced employers to compete on pay.

At the other end of the table, the sharpest fall was in publishing and broadcasting where the average pay award slipped by 0.8 percentage points to 2.2 from 3.0 per cent. David Carr, pay and benefits editor for IRS Employment Review, said: "The sector has been heavily affected by the downturn in advertising revenue and pay deals have slumped accordingly."

Growth in average earnings has stayed below the Bank of England's rough target of 4.5 per cent for several months and today's survey will provide some relief for the Monetary Policy Committee and for Chancellor Gordon Brown who yesterday warned that inflationary pay awards in public and private sectors would inflict serious damage to the economy.