Bosses top pay rise league

The average salary increase has been rising

by BBC economics reporter Jenny Scott

Pay settlements in the UK edged higher in the second quarter of this year, but not by enough to threaten the government's 2.5% inflation target, according to a survey published on Tuesday.

But bosses' pay is rising by four times the average.

The Confederation of British Industry, a lobby group for UK businesses, said service sector pay awards averaged 3.8% in the second quarter, up from 3.4% in the three months to March.

Top bosses pay

Arun Sarin, Vodafone: £21.2m

Mohan Gyani, Vodafone: £16.2m

Paul Chisholm, Colt Telecom: £15.2m

MIke Grabiner, Energis: £11.6m

Jean-Hughes Loyez, Kingfisher: £9.4m

Steven Kotler, Schroders: £7.2m

Paul Walker, Sage: £6.6m

Gerry Robinson, Granada: £6.3m

Francis Mackay, Compass Group: £5.2m

Jan Leschley, SmithKline Beecham: £4.6m

source: Guardian/Inbucon survey

Settlements in the manufacturing sector, which has been hamstrung by a strong pound and fragile overseas demand in recent years, also increased, to 2.9% in the three months to June from 2.5% in the equivalent period to March.

But a separate survey showed that the pay of Britain's top bosses rose by 16.5%.

That survey, by pay consultants Inbucon for the Guardian newspaper, showed that the directors of the UK's top companies gained even more when bonuses and share options were taken into account.

The highest paid chief executive, Paul Chisholm of Colt Telecom, earned £15.2m last year, while the top chairman, Gerry Robinson of Granada, took home £6.3m.

Mr Chisholm, who is leaving Colt later this year, also has £113m in unexercised share options.

There were 110 bosses who earned more than £1m last year.

And nine executives who stepped down received pay-offs of more than £1m, including Bob Ayling of British Airways and Sam Chisholm at BSkyB.

Pay pressure increasing

The news will put more pressure on pay settlements later in the year.

We do not expect this pick-up in settlements to put the inflation target at risk

Kate Barker, CBI

The CBI's chief economist, Kate Barker, said an increase in the cost of living was behind the rise in manufacturing pay, while skills shortages and the need to keep key staff had forced settlements in the buoyant service sector upwards.

"However, last week's subdued official earnings data suggested that the impact of high bonuses has faded, and firms are still facing strong competitive price pressure," she said.

"We do not expect this pick-up in settlements to put the inflation target at risk."

The CBI's survey evidence, gathered from 1,500 private sector pay deals, was at odds with official data released last week, which showed a slowdown in earnings growth in recent months.

The CBI survey may worry some members of the Bank of England's rate-setting Monetary Policy Committee.

With unemployment in Britain at its lowest rate for 25 years, there are those on the nine-strong MPC who are concerned that wages, and therefore prices and inflation, could rise in coming months.

Pay settlements in Britain are typically based on the headline rate of inflation.

That has risen to 3.3% in recent months from 1.1% a year ago.

Experts say that increase is likely to result in higher awards being negotiated in coming pay rounds.