Manufacturing pay closes gap while services suffer

Pay awards in manufacturing rose sharply in the first quarter of 2000, closing the gap with the previously buoyant service sector, according to the CBI’s latest quarterly survey.

However, the decline in service sector pay awards has dampened fears that inflationary pressure could trigger a further interest rate rise.

Manufacturing pay settlements ran at 2.6% for the first quarter of this year compared with 2.2% for the last quarter of 1999. Service sector levels fell to 3.3% at the end of the first quarter compared with 3.7% three months earlier.

In the survey, 48% of manufacturers said awards had been kept down because they have been unable to put prices up since last August.

Kate Barker, the CBI’s chief economic adviser, said: `These figures should ease concerns that service sector pay is in danger of spiralling upwards, increasing inflationary pressure and triggering another rise in interest rates.’