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06 January 2010

Inflation the new factor for 2010

The return to positive inflation is likely to influence pay deals in the months ahead, but as yet it is too early to say whether this will outweigh the effects of recession, continuing job losses, or public sector pay curbs. With fewer existing long-term deals to boost settlement levels this year, newly-negotiated private sector deals will set the trend.

After eight months of negative figures, the Retail Prices Index (RPI) was back in positive territory in November, rising annually by 0.3%, and is expected to rise further: If so, RPI inflation and the pay settlement trends will converge. Over the three months up-to and including November, settlements stuck to the established pattern with a mid-point of 2%, 1.5% in the private sector. The public sector was up slightly (2.6%) and manufacturing down slightly (1.2%) with services broadly steady on 2.4% (Workplace Report, December 2009).

As in earlier months, if existing long-term deals (negotiated in most cases before the recession took hold) are taken out of the picture the overall mid-point increase on lowest basic rates was lower, at 1.2%. Pay freezes accounted for three out of ten of these new settlements and a fifth of all settlements (including existing deals), also consistent with the established pattern.

With few settlements recorded for December and little information yet in on January deals, it is too early to say confidently what will happen in the New Year. Where a specific value for pay rises in 2010 had already been agreed the figures suggest a median of around 2.5% (Workplace Report, October 2009). But with fewer existing long-tem deals in place for 2010, much will depend on how negotiators react to rising RPI inflation.

Lewis Emery, pay and conditions researcher said: "Timing is likely to be significant again this year, just as it was in early 2009, although at that stage RPI inflation was falling rather than rising. Given the lag in inflation data becoming available, negotiators will have to judge how far and how fast the RPI is likely to rise, and just how that should be reflected in the settlements they negotiate".

Notes for Editors

  • Payline is LRD's database of negotiated agreements reported to LRD by unions. It includes around 2,300 agreements with information on pay, terms and conditions and other aspects of the employment contract.
  • Community, FBU, GMB, NUJ, PCS, RMT, TSSA, UCU, UNISON and UNITE union members have access to this database as do BFAWU officials and the TUC. For more information contact pay@lrd.org.uk
  • Labour Research Department is an independent organisation founded in 1912 to produce research on behalf of trade unions and the labour movement. More than 1,800 trade union organisations, including 55 national unions, are affiliated to it, representing more than 99% of TUC membership.
  • Pay settlements are negotiated rises on basic pay, and exclude bonus, increments, overtime and other allowances.
  • For further information about Workplace Report contact the Editor Rebecca Johnson at rebecca@lrd.org.uk.


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