U.K. workers are set to receive the biggest pay rise in almost 10 years as a higher minimum wage kicks in, the Bank of England said in its latest agent's report on business conditions.

Results of the survey revealed that companies are planning to offer average pay settlements of 3.1%, the highest since 2008, from 2.6% in the past year which was higher than the projected 2.2% rate. Workers involved in consumer services are expected to get the biggest pay settlement increase. The minimum wage for those aged 25 years and above is due to increase by 4.4% in April to £7.83 an hour, while pay for some younger workers will climb by more than 5%, Reuters said citing the survey of 368 businesses.

Firms also reported a greater tendency to pay above the minimum wage due to competitive pressures. Many companies, however, were planning to limit management pay hikes to 1% to 2% in order to hold down their overall wage bills. Companies also pointed to staff recruitment and retention, employer pension contributions, higher consumer prices and the availability of foreign workers as factors that will drive the rate of total labor cost growth in 2018.

"Expectations that the Bank of England will raise interest rates in May will likely be fueled by their regional agents reporting a pickup in companies' expected average pay settlements," Howard Archer, an economist at consultants EY Item Club, told Reuters.