Average pay settlements rose to 3.5% in the first quarter of 2007 – the highest since September 2001

Average pay deals rose in the three months to the end of March, a survey by Incomes Data Services (IDS) has found.

The study of 186 deals revealed median pay settlements rose to 3.5% from 3.42%. Pay deals last hit 3.5% in January, which was the highest level since September 2001.

More than one-quarter of the deals surveyed came in at 4% or more in March, IDS said.

The survey was welcomed by the Transport and General Workers’ Union.

General secretary Tony Woodley said: “Pay increases are still lagging way behind fat-cat rewards, productivity improvements and the soaring costs of basics, such as food and fuel.

“That’s why our aspirations in this year’s pay rounds are going to be more ambitious than for many years past.”

Private sector pay rises drove pay deals higher, with the government keen to keep public sector wage increases pegged in line with the Bank of England’s 2% inflation target.

Higher living costs are starting to take hold in wage deals, the survey suggested. Retail price inflation, on which many pay deals are based, hit a 15-year high of 4.6% in February.

Ken Mulkearn, editor of IDS Pay Report, said: “Wage settlers are currently faced with the pressure of reviewing pay levels against much higher levels of RPI inflation than before.”

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