Manufacturing pay awards have edged up while awards among service sector firms have dipped, according to a survey released today by the Confederation of British Industry (CBI).
The latest CBI Pay Databank Survey shows manufacturing pay settlements rose to 3.3 per cent in the three months to August. This compares to 2.8 per cent in the three months to May and 2.5 per cent at the same time last year.
Service sector pay awards averaged 3.5 per cent in the three months to August. This compares with 3.9 per cent in the three months to May and 3.4 per cent at the same time last year.
Kate Barker, CBI Chief Economist, said: “This takes some of the heat out of the argument that service sector pay is in danger of spiralling out of control. Manufacturing awards have edged up, but this trend is not expected to continue. With the strong competitive pressures that manufacturers face, pay in this sector should be kept in check. Together with benign official earnings data this suggests that the UK labour market continues to perform well. Despite buoyant employment, pay remains no threat to the inflation target.”
The main factor pushing up awards in the service sector is the need to recruit and retain staff, with 37 per cent of firms affected. The most important factor pushing up manufacturing pay awards is the cost of living, with 28 per cent of firms reporting it as the main reason.
The main factors keeping manufacturing pay awards down were the inability to raise prices – cited by 46 per cent of firms – and low profits, cited by 35 per cent of firms. In the service sector the main factors keeping awards down were an inability to raise prices (22 per cent), low profits (19 per cent) and low cost of living increases (18 per cent).
