Inflation triggers private sector pay increases

Average pay increases in the private sector went up 0.6% to 4% from last month fuelled by higher inflation, according to a new report.

Research conducted by pay analyst Incomes Data Services (IDS) found that a 0.1% retail prices index increase in November to 4.3%, sparked a number of high-level wage increases in long-term pay deals.

The IDS survey, covering 30 annual pay deals involving more than 430,000 employees, pointed to Network Rail having paid 4.8% to around 7,500 maintenance workers on 1 January, while 40,000 electricians received a 4% increase.

Staff in the UK police service, however, are currently embroiled in dispute with the government over the offer of a 2.5% pay rise, which has not been backdated.

Ken Mulkearn of IDS, said: “While the jury is still out on the extent to which the credit crunch in finance will affect the rest of the economy, our initial look at January deals confirms the continued influence of high inflation on pay negotiations in the private sector.

“In 2006, the Treasury argued that inflation increases were caused by ‘temporary factors’. However, average inflation for 2007 stands at 4.3% overall. City economists had also thought that inflation would fall, but warned of ‘upside risks’ from fuel and food,” Mulkearn concluded.