Positive inflation is likely to inform pay deals in 2010, according to the Labour Research Department (LRD).

The LRD says a return to positive inflation is likely to influence pay deals in the months ahead, but as yet it is too early to say whether this will outweigh the effects of recession, continuing job losses, or public sector pay curbs. With fewer existing long-term deals to boost settlement levels this year, newly-negotiated private sector deals, it says, will set the trend.

Following eight months of negative figures, the retail prices index (RPI) returned to positive territory in November, rising annually by 0.3%, and is expected to rise further. If so, LRD predicts that RPI inflation and the pay settlement trends will converge.

According to LRD’s Workplace Report for December 2009, in the quarter up to and including November, settlements stuck to the established pattern with a mid-point of 2%, 1.5% in the private sector. The public sector rose slightly (2.6%) and manufacturing declined slightly (1.2%) with services broadly steady on 2.4%

As in earlier months, LRD says that taking existing long-term deals (negotiated in most cases prior to the recession’s impact) out of the picture the overall mid-point increase on lowest basic rates was lower, at 1.2%. Pay freezes made up 30% of these new settlements and a fifth of all settlements (including existing deals), also consistent with the established pattern.