Wage freezes are becoming more common as the range of pay settlements for British workers is widening, an independent report says.

Incomes Data Services said on Monday that in one in 10 pay deals in the early weeks of 2002, incomes have been frozen.

The news will interest the Bank of England, for whom the scale of pay settlements is an important indicator when deciding on UK interest rates.

The BoE's Monetary Policy Committee said in the minutes of its most recent meeting that it would watch pay deals closely as it ponders whether to start increasing interest rates again after seven cuts last year.

Rates are currently at 4%, unchanged from December, while inflation - excluding mortgage costs - is at a 42-year low of 0.7%. But the Bank fears that any pickup in wages could give producers a chance to jack up prices.

Widening gaps

In contrast to IDS's last three-monthly survey in October - when most deals fell in a band of 3-4% increases - the predominance of settlements fell between 2% and 3.5%.

And the overall range of deals widened to 0-7.5%, as different firms respond in different ways to the global economic slowdown.

Also of note, the group said, was the increasing number of deals involving a long-term agreement, particularly in the public sector.

Many, it said, now covered periods of 18 months or more.