The gap between pay rises in the public and private sector is narrowing, according to the latest data.

A survey by Incomes Data Services (IDS) found that average settlements in the first three months of the year were three per cent.

IDS said that settlements were higher than a year ago, although inflation has since increased to 3.2 per cent.

"The higher rate of inflation is pushing private sector pay settlements upwards just as government pressure has lowered public sector increases awarded this year," said the report.

"The increase of 2.9 per cent for teachers and the offer of 3.2 per cent for a million NHS employees, both from April, now look decidedly modest."

A separate pay settlement survey by the CBI found pay rises in the private sector continuing to beat those in manufacturing companies.

Service sector awards rose three per cent in the quarter to January, while those in the manufacturing sector stood at 2.7 per cent

"Private sector firms are showing pay restraint as economic uncertainty spreads," said Ian McCafferty, the CBI's chief economic adviser.

"There is no sign of pay pressures posing any threat to underlying inflation. The pay gap between the two sectors is narrowing, but this reflects cuts in service sector settlements rather than significant manufacturing improvements."