Private sector pay settlements restricted in 2003

Low
company profits and intense price competition have held pay settlements across
the private sector, according to the CBI.

The
CBI’s latest pay settlements survey, published today, shows service sector and
manufacturing pay awards averaged 3.2 per cent in the three months to

November.

Settlements
over the previous quarter averaged 3.1 per cent in manufacturing and 3.2 per
cent in services.  They have been pegged
at a broadly similar rate throughout 2003.

Last
week, the Treasury cited unexpectedly low pay inflation as a key reason for
underestimating tax receipts – part of the reason for the large rise in
government borrowing.

Douglas
Godden, CBI head of economic analysis, said: 
"Weak trading conditions and intense price competition have ensured
private sector settlements remain benign and pose no threat to inflation. I do
not expect these factors to change rapidly next year.

"There
is some concern that larger public sector pay increases may eventually impact
on private sector pay pressures.  But
this should not be overstated, at least for the moment, as private sector
settlements are currently at a low base."

Low
profits and price constraints remain the most important factors pushing pay
down in both manufacturing and services. 
Twenty five per cent of service sector firms and 39 per cent of
manufacturing firms cited low profits. 
Forty one per cent of manufacturing firms and 24 per cent of services
firms cited price constraints.

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With
the numbers employed reaching a record high, 41 per cent of service sector
employers said the need to recruit and retain staff was the most significant
factor pushing pay up.  Thirty-five per
cent of manufacturing firms and 33 per cent of service sector firms said that
the high cost of living was also adding significant upward pressure on pay
increases.

By Quentin Reade