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Service sector feels the pinch

Stingy pay packets provide little Xmas cheer

UK employees are feeling the strain in their pay packets this Christmas as many service and manufacturing firms impose pay freezes.

According to the Confederation of British Industry, pay awards in the services sector fell by around 1.5 percent (to an average 2.8 percent rise) in the three months to October and by around half a percent in the manufacturing industry.

Though the latest CBI results found falls in the services sector more marked, previous research figures showed manufacturing industries were already badly hit. Falls in the level of pay awards are likely to continue.

"Pay awards are clearly starting to decline as firms feel the pinch of the economic downturn," said CBI chief economic adviser, Ian McCafferty.

But there is a stark contrast between the CBI's figures and those in the FTSE 100 index where executive directors have seen their basic salaries rise by as much as 12.8 percent.

The average cash payment made to executives of FTSE 100 firms this year is £683,000, an increase of 20.2 percent on last year.

"It certainly looks as though the lower sector has been hit the hardest," said Peter Haslett spokesman for the CBI.

Just under half (42 percent) of manufacturing companies blamed low profits and low orders (32 percent) for the low pay rises.

According to the CBI, things will start looking up within the next couple of years.

"It's a two-speed economy; manufacturing is in trouble while services are performing mainly well. We expect things to be slow in 2002 but to [improve] by 2003," said Haslett.

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