UK Wage Deals Steady At 3.5 Pct In 3 Mths To Nov

Policymakers are no longer as concerned about wage inflation as they were last year.

Pay settlements in Britain held steady at 3.5 percent in the three months to November, a survey showed on Thursday, but falling inflation is starting to nudge some wage deals lower.

Incomes Data Services said a quarter of deals came in below 2.9 percent, compared with 3 percent in the three months to October. IDS said forecasts for sharply lower inflation this year was bound to take its toll on wages.

Given fears over a prolonged recession and even the possibility of deflation, policymakers are no longer as concerned about wage inflation as they were last year.

The Bank of England has slashed interest rates by 300 basis points since October to 2 percent and is expected to cut by another 50 basis points on Thursday.

"If the economists' predictions are correct, negative inflation will represent uncharted territory for all those concerned with decisions on pay," said Ken Mulkearn, editor of IDS Pay Report.

"Previous experience indicates that when the cost of living drops, in the context of an economic slowdown, pay deals fall on average but tend not to go below a floor of around 2 percent."

However, a third of settlements were at or above 4 percent in the three months to November, reflecting relatively high retail price inflation throughout much of last year.

Retail price inflation fell to 3 percent in November from 4.2 percent in October, but it hit 5 percent in July and September -- the highest since 1991.

Although policymakers think RPI could turn negative this year, IDS said its high level last year would influence the key January pay round when many wage deals are reached because of long-term fixed arrangements pegged to that inflation measure.

"Most of these are under the subsequent stages of long-term deals and the majority have produced increases in the 3 to 5 per cent bracket," IDS said.