Pay deals are set to fall below 3 per cent this month because of lower inflation and the economic downturn.
Settlements averaged 3 per cent in the three months to December, but a snapshot of 30 agreements this month revealed deals were running at 2.1 per cent.
Analysts Industrial Relations Services (IRS) said its research suggested a downturn in settlements in the coming months.
Jeremy Baugh of IRS said: "A combination of falling inflation and easing labour market conditions looks set to translate into a dip in settlement levels in the early part of the year."
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