Pay awards in the manufacturing sector have increased in the last eight months, according to latest findings by IRS Employment Review.

The news comes despite reports of a production lag. Office of National Statistics show that output in the sector plummeted during June at its quickest rate since October 2002 with a fall of 0.7% over the month.

Yet survey analyses of 209 manufacturing settlements show that manufacturing pay awards in the UK show signs of improvement as the median value of pay awards stands at 3%, compared with 2.75% over the same period in 2003.

The pay awards at 3% are keeping pace with that for the economy and the service sector over the same period.

Sectoral differences were found to exist as pay prospects in the food, drink and tobacco sector pitched at 3.1% pipped those of the paper and printing industry which levelled at 0.4 percentage points below the economy as a whole.

Sheila Attwood of IRS said: “A combination of improving global outlook and continued domestic expansion has resulted in a gentle upward pressure on settlement levels in key parts of UK manufacturing. However, not all sectors have benefited from the upturn.

“The outsourcing of work, particularly to the Far East; the move away from final-salary pension schemes; and the knock-on effects of acquisitions and mergers are all of concern to manufacturing trade unions. While the future may look brighter, many people within manufacturing are cautious in their celebrations.”