Workers finally look set to see the benefit of the fledgling economic recovery in their pay cheques, according to the latest pay data[1] from EEF, the manufacturers' organisation.

The survey shows that the three-month average pay settlement by manufacturers has remained at a healthy 2.6% after hitting this height in January. Importantly, this includes one of the year's major pay rounds so will be seen by many as 'setting the scene' for pay this year.

At 2.6% it compares sharply to last year where pay settlements averaged out at 2.4%, with those agreed in the summer months scraping in at just 2.2%. However, it also suggests that manufacturers have reached affordable agreements with staff, allaying fears about wage inflation.

And there's further good news for workers' pockets. The proportion of pay freezes has stabilised at 5%, the lowest level since August 2008, while the proportion of smaller settlements has continued to fall with just over a quarter (26%) coming in at less than 2%. Pay deferrals have also remained stable at 4%.

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Last week EEF revealed that manufacturers were feeling increasingly optimistic with companies reporting strong growth thanks to a combination of solid UK sales and a boost in overseas trade. This confidence now appears to be translating into investment, jobs and pay.

Ms Lee Hopley, Chief Economist at EEF, says:

"We're by no means out of the woods yet, but there's plenty to suggest that we're on the right path. Pay settlements seem to be stabilising at a level that is both affordable and higher than last year. This is another good indication that the green shoots of recovery are firmly taking root and the pressure on household budgets, at least for manufacturing employees, is starting to unwind.

"Manufacturing continues to be a driving force and this also reflects in the growth of pay where the sector is outpacing the rest of the economy. Put simply, workers in the sector are reaping the rewards of recovery earlier than others. Hopefully this level of confidence will continue as manufacturers carry on picking up pace."

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