UK pay settlements hold at 4.9% in three months to June

By David Milliken

LONDON (Reuters) - British employers offered average annual pay settlements of 4.9% in the three months to June, unchanged from the previous month, industry data showed, highlighting continued strong wage growth that may sustain the Bank of England's inflation worries.

Brightmine, which compiled the data based on 145 pay settlements covering 370,000 employees, said it expected pay growth to slow due to lower inflation than last year.

But it said the slowdown could be less than it had previously expected, as Britain's new Labour government planned to factor in higher living costs and bring the minimum hourly wage for younger workers in line with those aged 23 and over.

"The government typically announces uplifts to the national minimum wage rates in November each year. Organisations with employees paid these rates can start to model what the proposed changes would mean ... particularly if the removal of the age-based adult rates is confirmed," Brightmine senior content manager Sheila Attwood said.

Big rises in the minimum wage - including a 9.8% increase in April to meet the former Conservative government's target of lifting it to two thirds of median earnings - have already had a noticeable impact on average pay.

If pay settlements linked to the higher minimum wage were excluded, the median pay settlement in the most recent quarter would have been 0.6 percentage points lower, Brightmine said.

Next week the BoE is due to publish new inflation forecasts, but investors have scaled back bets that it will also cut interest rates from a 16-year high after official wage growth and services price inflation data last week remained high.

Official data showed average weekly earnings in the three months to June were 5.7% higher than a year earlier, almost double the increase most BoE policymakers view as compatible with consumer price inflation staying at its 2% target.

(Reporting by David Milliken, editing by Andy Bruce)