Recession takes its toll as pay awards shrink

Recessionary pressures have continued to squeeze pay awards in manufacturing since the summer while expected productivity growth is slowing.

Pay awards fell to an average 3.1 per cent between September and November compared with 3.4 per cent in the previous three months, according to the Confederation of British Industry.

One in three employers has introduced a pay freeze since the current round of bargaining began in August.

The latest level of settlements notified to the CBI Pay Databank is sharply down on the 4.2 per cent provisionally estimated for the third quarter of the year to September. In the three months to November 1991, awards were averaging 4.6 per cent.

Belt-tightening is also evident in service companies. Pay awards notified to the CBI have fallen to 3.7 per cent in the three months to November compared with 4.5 per cent in the previous three months and 5.6 per cent in the same period a year ago.

Alongside lower pay awards there has been a further fall in projected improvements in productivity. Among companies reporting settlements, expected productivity growth over the next 12 months fell to 2.8 per cent during the third quarter compared with 3.8 per cent in the second quarter.

Actual as opposed to expected productivity growth over the previous 12 months rose, however, from 2.1 to 2.7 per cent. The latest figures have encouraged Howard Davies, director general of the CBI, to applaud a 'further marked change for the better in pay and performance behaviour since the summer'.

Concern among industrialists about prospects for the UK is underlined today by the latest forecast by the Ernst & Young Item Club. It expects a slow recovery in output of 0.8 per cent next year, rising to 2.2 per cent by 1995, but this will not prevent unemployment rising to a peak of 3.4 million in 1994.

Inflation is forecast to fall to less than 2 per cent next year because of further cuts in base rates to 6 per cent.

But by the end of 1993 it will rise to over 4 per cent because of sterling's devaluation, breaching the Government's target ceiling. A sizeable structural deficit in the Government's finances will also mean higher taxes in future Budgets.

Britain's manufacturing heartland is showing few decisive signs of economic recovery, according to a survey today by the Birmingham Chamber of Commerce, writes Michael Harrison.

Although home and export deliveries have picked up in the past three months and business confidence is rising, the outlook for exports and investment remains poor and companies forecast a further sharp increase in unemployment.

According to the chamber's latest survey, a positive balance of 11 per cent of firms expect turnover to rise in the next year. This compares with a balance of 9 per cent in September forecasting that sales would decline.