'Big pay awards' looming this year

EARLY signs that 2005 will be a bumper year for pay rises are expected in official figures this week. Rising prices have buoyed wage demands in the private sector and one million National Health Service employees are due to receive one-off payments for modernising their working practices and pay structures.

Latest figures already show increases in average earnings close to 4.5% - the figure that is thought to be the Bank of England's unofficial ceiling for pay rises in order to keep inflation in check.

And price inflation measured on the traditional Retail Prices Index, favoured by wage bargainers, stands at 3.4% on the most recent data, against 2.5% a year ago.

This means the traditional January round of pay talks starts from a much higher base in terms of cost of living increases.

A sustained upward trend in pay deals would ring alarm bells at the Bank's monetary policy committee, which sets interest rates.

Last week the MPC held interest rates at 4.75% for the fifth consecutive month.