Disparity in two-speed economy widens pay gap

Manufacturing
pay deals have fallen to their lowest in 21 years as the gap between pay
settlements widen in Britain’s two-speed economy, says the CBI.

CBI
figures show that pay awards in UK factories averaged 2.3 per cent in the three
months to January – the lowest since 1980.

But
pay awards in the service sector have climbed – averaging 3.8 per cent in the
three months to January.

Ian
McCafferty, CBI chief economic adviser, said: "The gap in pay awards is
growing because of the two-speed economy. Manufacturers are battling a harsh
global slowdown and a squeeze on profits is holding down pay awards against a
backdrop of low inflation.

"But
service-sector pay awards are fairing better, reflecting the more buoyant
consumer market. Nevertheless, they are not high enough to be at odds with the
Bank of England’s inflation target."

Manufacturing
awards were pushed down by low profits (40 per cent), price constraints (38 per
cent), and low orders (28 per cent). Twenty-three per cent of manufacturers
said recruiting and retaining skilled staff was the most important factor
pushing up pay. This was followed by 21 per cent citing rises in the cost of
living.

In
the service sector, 29 per cent said recruiting and retaining skilled staff was
the most significant factor pushing up pay. This was followed by 27 per cent
citing the cost of living. Factors pushing service-sector pay awards down were
low profits (27 per cent) and price constraints (21 per cent).

The
survey covered 1,400 private sector settlements and awards for 1.6 million
employees.

By Quentin Reade

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