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British employers agree 2 percent pay rise in third quarter

LONDON (Reuters) - British employers agreed a median 2 percent pay rise with workers in the third quarter, less than the increases in the first six months of the year, a survey by researchers Incomes Data Services showed on Thursday.

Manufacturers offered the steepest rises, averaging 2.5 percent. Public-sector salaries rose by an average of only 1 percent.

Pay reviews in the retail, fast food and hospitality sectors pushed the median pay rise below the 2.5 percent recorded in the first two quarters.

October is the busiest month for pay setting in businesses, and this year many firms raised wages in line with an increase in the National Minimum Wage, which went up by 1.9 percent on October 1 to 6.31 pounds per hour.

"Our figures highlight the impact of the National Minimum Wage on pay setting in the lower-wage areas of the economy," said Ken Mulkearn, who heads IDS's pay research. "The effect on our median is clearly driven by pay decisions in retail and fast food, where some companies pay staff at the level of the statutory minimum."

Britain's economy has staged a surprisingly strong recovery this year, but below-inflation pay increases have raised doubts about the sustainability of growth that has so far been mainly driven by consumer spending.

The third-quarter median pay rise was slightly below the 2.2 percent rate of consumer price inflation recorded by the Office for National Statistics in October.

Incomes Data Services is owned by Thomson Reuters. Its survey was based on 56 pay deals struck in the three months to the end of October, which affected 1.1 million employees, 4 percent of the total in Britain.

(Reporting by Alexander Winning, Editing by Christina Fincher; Edited by Larry King)