LONDON (Dow Jones)--Pay awards in the U.K.'s manufacturing and service sectors fell sharply in the first quarter of 2002, indicating little inflationary pressure from the wage sector, according to the Confederation of British Industry's pay databank survey published Monday. Manufacturing awards averaged 2.3% in the first quarter, down from 2.9% in the fourth quarter of 2001 and 2.9% in the first quarter 2001. "This means manufacturing awards are at the lowest level for the time of the year since at least 1980," the CBI said in a statement. Around 40% of manufacturers agreed to pay deals in the first quarter. Service sector pay awards averaged 3.3% in the first quarter, down from 3.9% in the fourth quarter of 2001 and from 4.1% a year earlier. Awards in this sector reached their lowest level for this time of the year since 1995, when they averaged 3.1%. "This is hard evidence that there is no inflationary pressure. Having settlements in both sectors under control is testimony to the flexibility and dynamism of the labor market as well as to the cost pressures facing employers," said Ian McCafferty, the CBI's chief economic adviser. The low level of pay awards should help damp consumer spending, he said, allowing the Bank of England to keep rates on hold for now. The official base rate stands at 4.0%. Service companies said low profits were the key factor pushing pay settlements down, while manufacturers cited low profits and the inability to raise prices as reasons for the low level of pay increases. The survey covers 1,400 private sector pay settlements for 1.6 million employees.