Pay rises now trailing inflation

Staff are going to start to demand bigger pay rises, the report says

Average pay rises are now running behind the level of inflation for the first time in a year, a report said.

While UK pay increases have stayed at 2.9% for the past three months, headline inflation is now 3%, said analysts Industrial Relations Services.

The IRS said that employees were now certain to seek higher wage rises to bring them at least back into line with increasing prices.

Pay deals are now slightly higher in the manufacturing sector than services.

Dragging behind

The IRS spoke to 188 firms to compile its survey.

"The upturn in headline inflation - recorded in both May and June this year - has yet to filter through into pay settlements," said Sheila Attwood of IRS.

"Now that inflation is outstripping the level of pay awards, employees will be looking for higher increases to at least bring them in line with the rise in the cost of living."

Recent interest rate increases from the Bank of England have not helped matters for workers, and more increases are being predicted.