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Pay Awards fall to 3.1%

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Falling headline inflation and slowing economic growth have finally fed through to a drop in settlement levels, according to independent pay analysts Industrial Relations Services.

Latest figures from the IRS databank show that pay awards across the whole economy dipped to 3.1% in the three months to April 2001, down 0.2 percentage points from March’s figure. Half of all pay deals are now worth between 3% and 3.7%.

The downturn in settlements reflects the steady downward drift in the all-items retail prices index since the end of last year. Since November 2000, headline inflation – still the key benchmark in the pay-setting process – has fallen by 1.5 percentage points (to stand at 1.8% in the year to April). Subject to the customary time-lag, this has fed through into a drop in wage deals in April’s busy rolling quarter (when a third of all settlements monitored by IRS are due to be concluded).

Commenting on the results, Jeremy Baugh, editor of IRS Pay and Benefits Bulletin said:

“The drop in pay deals reflects the subdued inflationary climate in which pay bargaining has been taking place. Falling inflation, the predicted slowdown in the UK economy and the continuing pressure on employers to deliver low-cost competitive pay deals are all likely to help restrain demands at the negotiating table and keep a firm lid on settlements in the coming months.

The evidence at the end of the crucial April wage round suggests that downward wage pressures will intensify, raising the prospect of a further fall in basic pay awards in the months ahead”.

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