Manufacturing pay deals at record low

Wage inflation is likely to remain low, the CBI says

Pay deals in manufacturing firms have fallen to a record low of 2.3%, figures show.

The Confederation of British Industry (CBI) said that settlements in the first three months of the year were 0.6% lower than during the previous quarter.

The figure was the lowest for the time of year - the busiest time for manufacturing wage deals - since current records began in 1980, the CBI said.

The business group's survey of 1,400 private sector settlements, the most comprehensive of its kind, showed increases averaged 3.3% in service firms, down from 3.9% in the previous three months.

Pressure on employers

Awards in the service sector are at the lowest level since 1991 when they averaged 3.1%.

Ian McCafferty, the CBI's chief economic adviser, said: "This is hard evidence that there is no inflationary pressure.

"Having settlements in both sectors under control is testimony to the flexibility and dynamism of the labour market as well as cost pressures facing employers."

Mr McCafferty said the research showed wage inflation was likely to remain low for some time, which should allow the Bank of England to keep interest rates on hold.

Firms in the service and manufacturing sectors said low profits were a key factor in keeping pay awards down.