Private sector pay 'to trail inflation' in 2011

Most UK workers face the prospect of real declining incomes this year, the research suggests

Private sector pay could rise by more this year than in 2010, but is still likely to trail inflation, research by Incomes Data Services has suggested.

Pay awards were running at 2.2% in November, up from the 2% rises seen in most of the past year, and IDS predicts pay rises may average 3% this year.

However, this is less than half the rate of retail price inflation (RPI).

The public sector in the UK faces pay freezes in most areas as a result of the government's spending cuts.

While the number of explicit pay freezes has been dropping sharply, IDS expects public sector pay rises to fall from a typical 0.75% increase in 2010.

The latest official figures suggest that RPI inflation - which includes mortgage interest payments and is often used by employers when negotiating pay deals - rose to 4.7% in November from 4.5% the month before.

Many analysts expect RPI to remain above 4% this year.

'Triple whammy'

The BBC's business editor Robert Peston said that the pressure on pay expected this year followed pay squeezes in the previous two years.

"We are talking for many people about a few years of declining take-home pay in real terms," he said.

Ken Mulkearn, editor of the pay report from IDS, said the picture was particularly bleak for public sector workers.

They could face a "triple whammy of low pay rises or pay freezes, compared to high inflation and increased contributions to pension schemes", he told the BBC.

Earlier research from IDS showed that for the year to October the total earnings of FTSE 100 directors rose by 55%, although Mr Mulkearn pointed out that this included bonuses, share options and other long-term incentives in addition to salary.

"It's quite a contrast between largesse on the one hand and a squeeze on living standards on the other," Mr Mulkearn said.

Such large rises in earnings for senior executives are both damaging and divisive, said Brendan Barber, general secretary of the TUC.

"What we've seen, over quite a long period now, is levels of increases being secured by the top corporate leaders that are simply not justified in any way by performance - and are out of all proportion to what's been happening to the rest of the workforce," he said.

"And that is a recipe for desperately low morale, when ordinary workers see themselves being held back so severely while the leaders of their organisations are rewarding themselves so handsomely."