The Financial Times has agreed an improved pay deal with its editorial staff, it said on Wednesday, and the National Union of Journalists said it had now called off industrial action planned for next week.

The NUJ and the FT said the Pearson-owned company had agreed to pay an extra 0.5 percentage points over its previous offer, meaning that all staff will get an increase of at least 2.5 percent for 2011.

The overall pay bill will still be 3.5 percent, as less of the total budget will be reserved for merit pay. The union had argued for a more even distribution of the money available for pay increases.

The FT NUJ chapel voted unanimously to welcome the decision to redistribute this year's pay award more equitably, the union said in a letter.

Financial Times Managing Editor Lisa MacLeod wrote in an email to staff: We hope we can now move forward and all focus on our collective priority of producing outstanding journalism for the FT newspaper and the website.

(Reporting by Georgina Prodhan; Editing by Hans-Juergen Peters)