Pay deals pick up to 3.3 percent

LONDON (Reuters) - Wage settlements picked up to 3.3 percent in the three months to May but held a full percentage point below retail price inflation, a survey showed on Friday.

Pay has become a live political issue in Britain at a time when rising living costs are squeezing households' disposable income.

Pay consultant IRS said median pay deals rose to 3.3 percent in the three months to May from 3.2 percent in the three months to April. Nevertheless, pay rises are subdued by historical standards and have been running below retail price inflation since June 2006.

"The current economic slowdown has resulted in a changing balance of power in the pay bargaining environment," said Sheila Attwood, an editor at the consultancy.

"With below-inflation pay awards now a reality for the majority of workers in both the public and private sectors, our data suggest that employers have gained the upper hand in pay negotiations."

Retail price inflation, the most widely-used gauge of living costs, rose to 4.3 percent in May. Consumer price inflation, the measure targeted by the Bank of England, rose to 3.3 percent, its highest level for more than a decade.

Prime Minister Gordon Brown has urged wage restraint to prevent a return to the wage-price spirals seen in the 1970s and 1980s. But he may have a fight on its hands. Public sector workers voted to strike this week after rejecting a 2.45 percent pay offer.

(Editing by Ron Askew)