Pay deals weaken in service sector

Pay rises in the service sector have fallen to their lowest level in nine years, according to the Confederation of British Industry (CBI).

The CBI said average pay deals in the sector - which includes shops, restaurants and hotels - dropped to 2.8% in the three months to April.

The figure, the lowest since April 1994, falls well below a 3.1% average pay rise in January and a 3.2% rise in April 2002.

The CBI blamed a weak economy and falling profits.

"Retailers are seeing an underlying slowdown in sales while financial services and tourism are still suffering from low profits," said Ian McCafferty, the CBI's chief economic advisor.

Manufacturing gains

The poor wage deals came during the key period when companies usually introduce pay changes.

But uncertainty during the months leading to the war in Iraq and a downbeat economic outlook kept prices, and pay rises, low.

"The service sector has been through a difficult period," said Mr McCafferty.

The struggling manufacturing sector, however, showed a more positive trend, with pay rises up slightly to 3% in the three months to April.

This follows a 2.8% average rise in January and 2.7% in April 2002.

It is the first time service sector awards have been lower than those in manufacturing for six years.

But the CBI warned the manufacturing sector remained under pressure.

"Firms may be indicating that pay awards have edged upwards from the lows of last autumn, but we are a long way from a significant rise in the overall trend," said the report.