The deal thrashed out between transport union TGWU and the Federation of Master Builders under the umbrella of the Building and Allied Trades Joint Industrial Council also guarantees an extra day holiday for the Royal Wedding.

The rise covering general operatives and NVQ2 and NVQ3 crafts will take effect from 12 September.

Richard Diment, Director-General of the FMB said: “While the settlement is not as generous as we would have liked, we have to acknowledge that the industry is still in decline and that growth is not expected until 2013.

“In such harsh conditions, preservation of jobs must remain the priority in the face of considerable informal economy competition and shrinking order books.”

This time last year workers received a modest 2% increase with the hope that conditions would have eased sufficiently to enabled a more meaningful rise in the 2011/12 round.

But Diament added: “This has not happened and the recovery seems just as far away now as it did then.

“The construction SME sector has been in recession for three years and the outlook for the industry as a whole remains bleak with contractions of 2% and 0.7% expected in 2011 and 2012 respectively.

“Under these circumstances a settlement that reflects the current rate of inflation was simply not deliverable without putting jobs at risk.”