Sainsbury’s is handing its staff an above-inflation 5% pay rise, after reporting its “biggest ever Christmas”.

The UK’s second-largest grocer said its hourly-paid colleagues will get the increase over the next year, meaning staff will continue to receive the real living wage.

The decision will provide a key indicator as to how companies intend to respond to the increases in national insurance contributions and minimum pay rates that were announced in the budget.

Yesterday, bakery chain Greggs said two-thirds of its workers were handed a 6.1% pay rise this month.

The announcements coincide with a speech by Sarah Breeden, a member of the Bank of England’s monetary policy committee, who told an audience in Edinburgh yesterday that its interest rate policy would be influenced by how companies respond to the rise in labour costs.

Sainsbury’s also reported that it won grocery market share for the fifth consecutive Christmas, with like-for-like sales up 3.8% in the six week’s to 4 January.

It followed positive numbers from Marks & Spencer and Tesco, suggesting the cost of living pressures may be easing.

Figures from the Scottish Retail Consortium KPMG retail sales monitor showed a slight rise in sales, though there is continuing pressure on consumers’ wallets

Total sales in Scotland increased by 0.8% compared with December 2023, when they had grown 1.9%.

This was above the three-month average decrease of 0.8% and above the 12-month average decrease of 0.4%. Adjusted for inflation, there was a year-on-year increase of 1.8%. On a like-for-like basis, Scottish sales increased by 2.% compared with December 2023, when they had increased by 1%.

David Lonsdale, director of the SRC, said: “Scottish retail sales saw solid growth in December as Black Friday and Christmas helped retailers to their best monthly performance of an otherwise flat golden trading quarter and tepid 2024.

“Overall, the value of Scottish retail sales rose by 1.8% in real terms during December.

“As the Hogmanay bells tolled retailers won’t have been heartbroken to bid farewell to 2024.

“Sales in the crucial final golden trading quarter were identical to last year. That is indicative of a tough combination of household discretionary spending being limited, and much of what there is being spent on experiences rather than products.”