Britain's biggest supermarket Tesco on Thursday said it would give a 5.8% pay increase to store and fulfilment centre workers in a pay settlement which will be reviewed again next year due to the uncertain economic environment and high cost of living.

The new pay deal takes the pay of the hourly-paid workers to 10.10 pounds ($13.21) an hour from 9.55 pounds previously, following agreement with the Union of Shop, Distributive and Allied Workers (USDAW), and will take effect from July 24.

The total hourly rate for delivery drivers and assistants will rise to 11 pounds. The deal also includes changes to benefits employees receive, extending their discount at stores, as well as more investment in training.

"We are delighted to have reached an agreement with USDAW that recognises the vital role our colleagues play in our business now and in the future, giving them a well-deserved pay rise, more access to extra hours and setting out a long-term commitment and investment in their careers at Tesco," said Jason Tarry, Tesco UK and Ireland CEO.

USDAW said that the pay deal gives Tesco workers the highest hourly rate of pay in the sector.

British employers are offering higher pay deals in the face of staff shortages and rising inflation, with Bank of England officials, who have raised interest rates in successive meetings this year, urging workers to show restraint in pay negotiations to stop inflation becoming entrenched.

"This new deal recognises the contribution our colleagues make to our business at a time when household budgets are under pressure," Tesco said.

"Given the uncertainty in the economic environment, this will be a one-year deal, rather than two-year, and we will review pay again with USDAW in 2023."

($1 = 0.7648 pounds)

(Reporting by Alistair Smout; editing by Michael Holden)