"This reward package sees our biggest investment in store pay for a decade," said Matt Davies, Tesco's UK CEO.

Tesco's move comes as the Bank of England is closely watching a pick-up in inflation for signs it might fuel higher pay settlements.

However, official data earlier this month showed British workers' earnings after inflation shrinking at the fastest pace since 2014.

The supermarket chain, which employs 310,000 in the UK, said the current hourly rate of 7.62 pounds ($9.70) an hour will increase to 8.42 pounds an hour by November 2018.

It said that alongside a staff benefits package which includes a bonus plan and pension, the average store worker will be on an equivalent hourly rate of 9.52 pounds by November next year.

The government mandated National Living Wage for workers aged 25 and over currently stands at 7.50 pounds an hour.

News of the Tesco pay increase comes two days after it said it would close a customer service centre in Cardiff with the loss of up to 1,100 jobs.

(Reporting by James Davey, editing by David Evans)