UK pay deals hold steady despite economic uncertainty

Amid
uncertainty about the economic impact of the war in Iraq, and despite headline
inflation rising above 3 per cent, UK pay deals held steady in the first
quarter of 2003 at 2.9 per cent, according to research.

The
upturn in the level of settlements seen at the start of the new-year was
sustained in March, with the headline measure of basic pay awards (the median)
remaining unchanged for the third consecutive rolling quarter.

The
figures from IRS (Industrial Relations Services) Pay Databank not only indicate
that the upward hike in pay awards is more than a temporary blip, but also
provide an important benchmark for the all-important spring bargaining round.

Other
key findings include:


Public sector awards stay ahead of private – in the 12 months to March 2003,
the median basic pay settlement in the public sector was 3.4 per cent compared
with 2.5 per cent in the private sector.


The gap is not expected to rise further, however, due to the Government’s call
for "responsible" pay rises in the public sector.


Services overtake manufacturing – awards in the private services and
manufacturing sectors have been closely matched in recent months. Those in the
service sector in the three months to March were pitched at 3 per cent,
exceeding those in manufacturing by just 0.1 percentage point, for the third
consecutive month.


Range of awards remains tight – the upper quartile (above which the highest 25
per cent of deals are pitched) stands unchanged since February, at 3 per cent,
while the lower quartile (below which a quarter of awards lie) remains at 2.5
per cent. Half of all basic pay settlements are therefore pitched in a narrow
band between 2.5 per cent and 3 per cent.

IRS
Pay and Benefits Bulletin editor, David Carr, said: "The overall economic
picture is unclear, with consumer and business confidence having both taken
serious knocks recently. However, forecasts for UK economic growth look almost
healthy compared with those for other countries, such as those in the eurozone.

"Looking
forward, the only constant is the likelihood of continued uncertainty.  If inflation climbs much higher, this will
undoubtedly intensify employees’ demands for higher pay rises.

"On
the other hand, in spite of high employment levels and the tight labour market,
many companies have heeded their balance sheets and resisted generous pay
offers. The degree to which these twin factors of higher inflation and
companies’ ability to pay can be reconciled will be a central feature of the
bargaining scene over the next few months."

By Ben Willmott

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