Low company profits and intense price competition have held down pay settlements across the private sector, according to the CBI.
The CBI's latest pay settlements survey, published today (Monday), 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.
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 a significant upward pressure on pay increases.
The CBI pay survey is not directly comparable to the official average earnings figures. It only includes bonuses if changes to bonus schemes are made as an integral part of the pay award. The data also excludes any salary increases due to changes in hours worked or promotions.
The survey is the most comprehensive of its kind, covering some 1,400 private sector settlements/awards for 1.6 million employees each year. It has been conducted on the same basis since 1980.