UK private-sector pay settlements fall despite higher minimum wage, data shows

LONDON (Reuters) -Typical annual pay settlements offered by British companies in the three months to April fell slightly, despite a rise in the minimum wage which boosted pay significantly for some lower-paid workers, industry data showed on Monday.

The news is likely to be welcomed by the Bank of England, which has forecast a sharp slowdown in pay growth this year that it says is needed for consumer price inflation to return to its 2% target.

Incomes Data Research said the median private-sector wage deal edged downwards to 3.4% in the three months to April from 3.5% in the three months to March.

However, the proportion of employers offering pay settlements of more than 6% jumped to 11% from March's 2%, reflecting a 6.7% increase in the minimum wage to 12.21 pounds ($16.51) an hour that took effect in April, IDR said.

April also marked the start of higher national insurance contributions for employers, which have made some businesses more reluctant to hire.

For the whole economy, pay settlements were unchanged at 3.2%, reflecting a 2.7% rise in pay at not-for-profit employers. Very few public-sector employers were in the sample of 129 pay deals which covered 1.3 million workers, mostly at large companies, IDR said.

Britain's Office for National Statistics is due to publish wage data for the three months to April on Tuesday. Preliminary Reuters polling data on Friday showed average earnings growth, excluding bonuses, is forecast by economists to slow to 5.4% from 5.6%. The BoE sees pay growth of around 3% as consistent with on-target inflation over the medium term.

Average earnings data in Britain tends to exceed pay settlements by some margin as the former also captures the boost to pay when employers offer more higher-paid roles.

($1 = 0.7396 pounds)

(Reporting by David Milliken; Editing by Sachin Ravikumar)