PAY settlements continued rising during the summer as inflation crept higher. But two surveys published today show that public sector employees and many in manufacturing failed to keep abreast of the cost of living.

Income Data Services said large companies had been most generous to their employees in pay settlements logged since April. Most had granted inflation-beating pay rises of 4% or more, comfortably above the inflation rate of 3.7% in June.

The Confederation of British Industry (CBI), meanwhile, highlighted pay awards averaging 4.5% in the service sector during the three months to July. Labour shortages were cited as a key factor pushing up wages.

The big losers in the summer pay round were public sector employees such as teachers, nurses and council workers.

According to Income Data Services, most public sector workers were forced to accept pay awards of 2.5% to 3.5%.

''Below-inflation deals have been the norm across much of the public sector, including the NHS, local government and inflation,'' it noted.

Many workers in manufacturing companies hit by the first signs of recession were also forced to accept low increases.

Income Data Services said: ''While higher inflation during a busy pay bargaining period has clearly added to upward pressure on pay in many companies, elswhere difficult trading conditions have held pay rises below the inflation rate''.

The CBI highlighted the gap between pay settlements in sluggish manufacturing and the still booming service sector.

Manufacturing pay just managed to keep abreast of inflation, with settlements running at an average of 3.7% during the three months to July, the CBI said. That was up from 3.6% in the previous quarter and 3.1% in the same period last year.

But manufacturers found it almost impossible to raise their prices in a slack market hammered by the strong pound, the Asian crisis and weakening consumer demand in the UK. So not surprisingly they tried hard to keep a lid on wages.

The CBI said 43% of manufacturers reported that their inability to raise prices was keeping pay awards down - the highest percentage for five years.

But the employers' organisation said that labour shortages in the still buoyant service sector forced companies such as banks and supermarkets to pay over the odds.

The average level of pay settlements in the service sector rose to 4.5% from 4.1% in the previous quarter and 3.8% a year ago, it noted.

The need to recruit more staff and retain existing employees was cited by 42% of service sector companies as a ''very important'' factor putting upward pressure on settlements.

Income Data Services said just under half the private sector pay increases recorded since the beginning of April had been for 4% or more. Only a quarter came in at less than 3.5% - well below the rate of inflation.

But over three-quarters of the pay settlements logged in the public sector were worth between 2.5% and 3.5%.

The research organisation highlighted the fact that large companies, whether in services or manufacturing, appeared to be the best payers.

ICI staff received a 4.3% pay award, while workers at the Woolwich building society-turned-bank got 4.5%, it noted. Tesco and Woolworths both settled at 4.0%.