LONDON: UK pay growth accelerated to the fastest pace in almost seven years at the end of the first quarter as companies reported stronger overseas demand.

An index of wage growth for full-time employees rose to 62.2 in March, the highest since July 2007, from 61.7 in February, KPMG LLP and the Recruitment and Employment Confederation said in London today. Separately, the British Chambers of Commerce said measures of export sales at manufacturers and services companies increased in the first quarter, as did their employment intentions.

The strengthening of pay growth coupled with cooling inflation may support consumer spending, the main driver of the economy in 2013. The government and the Bank of England are counting on a pickup in exports and investment to keep momentum in the recovery. Industrial production probably rose 0.3 percent in February, economists said in a survey before a report today.

“Growth is strengthening in the short term, but challenges persist and, despite this progress, the recovery is not yet secure,” said BCC Chief Economist David Kern. “U.K. growth is still reliant on consumer spending, driven by a resurgent housing market and a declining savings ratio.”

KPMG and REC said their gauge of permanent job placements slipped to 62.6 in March from 65.2 the previous month, while an index of temporary jobs also declined.

The BCC survey showed an index of manufacturers’ export sales rose 5 points to 40 in the first quarter and export orders climbed 5 points to 35. Domestic sales also gained. The report showed that manufacturers’ hiring expectations over the next three months surged to 40 from 31.

Services companies saw both overseas sales and orders increase to a record in the quarter, while a measure of domestic sales fell to 35 from 38.

(Bloomberg)