U.K. Labor Unions Clinch Bigger Pay Increases, IDS Reports

By Brian Swint

Oct. 2 (Bloomberg) -- U.K. labor unions clinched bigger pay raises for employees in the three months through August as record oil prices pushed inflation to the fastest pace in a decade, Incomes Data Services said.

The median salary settlement rose to 3.8 percent, compared with 3.6 percent in the three months through May, the London-based research group said in an e-mailed statement today. The reading is based on 62 agreements covering 1.4 million workers.

Bank of England policy maker Kate Barker said last week that there's still a threat that faster inflation will lead workers to bid up their pay, entrenching higher prices in the economy. The Bank of England has refrained from cutting interest rates since April even as Britain heads for a recession.

``At this stage it is not possible to predict what will happen to pay rises with precision, but some firms will remain able to maintain the purchasing power of their employees' salaries,'' said Ken Mulkearn, the editor of the IDS report, in a statement. ``Others, more affected by the downturn, will pay towards the lower end of the range of increases.''

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.