According to the latest Pay Bulletin from the EEF (www.eef.org.uk), the manufacturers’ organisation, there was a gradual acceleration in pay growth across the sector throughout 2017, as inflationary pressures kicked in and business conditions improved.

Settlements were running at an average increase of 1.8% at the start of 2017, and they ended the year at 2.3%. At the start of 2018, elevated CPI inflation and a positive trading outlook for manufacturers are still very much at play in determining pay deals.

With a significant number of settlements being agreed in the January ‘bargaining round’, the monthly data is regarded as a useful predictor of wage growth across manufacturing for the year ahead.

The monthly average pay settlement for January alone was a shade higher at 2.5%, up from the average pay deal of 1.9% in January 2017 — and the highest monthly average for January since 2014.

There has also been a significant shift in the distribution of pay settlements compared with January 2017. A year ago, the majority of settlements (72%) were agreed at 2% or less; in January 2018, the level was down to 39%.

More deals — 56% in Jan 2018 compared with 25% in 2017 — have resulted in pay increasing by between 2.01% and 3% at the start of this year, although settlements above 3% remain few and far between.

Commenting on the data, Lee Hopley, chief economist at the EEF, said: “The first indications from the January pay round show an increase in average settlements across manufacturing at the start of 2018.

“This reflects a combination of brighter business conditions for the sector, with firms responding to higher inflation and the need to offer competitive market rates.

“The direction of travel of pay increases so far this year is in line with the Bank of England’s expectations, but with top-end deals still very much in the minority, average pay settlements look some way from breaching the 3% mark. However, they should be outpacing inflation in the second half of this year.”