Rising inflation is set to put pressure on pay settlements and compound the government's difficulties in holding public sector pay down, Income Data Services, the pay analysts, said. Settlements in the private sector were bunched around 3 per cent in the three months to June, IDS said, but the vast majority of those predated the rise in the retail prices index to 3 per cent in May.

With most independent forecasts of inflation suggesting it will stay at that level for the rest of the year, that points to higher pay rises, with RPI being normally the "starting point for private sector pay bargaining".