Pay and inflation gap narrows

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Pay analysts Industrial Relations Services said recent average settlements were worth 3.5%, against an RPI inflation figure of 4.8% in August.

The gap between pay and inflation was 1.5% last month, but has been reduced in light of recent settlements and falling RPI inflation, said the report.

A study of 76 settlements showed that half of deals in August were worth between 3% and 4%, while rises in the public sector were 1% below increases in private firms.

Sheila Attwood of IRS said: "Private sector pay awards are heavily influenced by movements in the retail prices index inflation measure.

"However, negotiators will often look to set their pay awards based on a longer-term trend in inflation.

"As such, while RPI fell in August, pay setters will be looking at how this downward path progresses before deciding the extent to which pay settlement levels can also fall."