THE strong pound might be putting the squeeze on Scottish firms' profits, but new research shows our captains of industry are still managing to scrape together a decent living.

Indeed, directors and managers north of the Border are the best-paid in the UK outside central London, earning an average of more than #130,000 a year.

The pay boom is revealed in the 25th national earnings survey by the Institute of Management and consultancy group Remuneration Economics.

The worst-off directors and managers come from the North-west of England, with directors earning #65,000 - half the going rate for their counterparts in Scotland.

Nationally, the survey showed pay rises averaging three times the rate of inflation.

Directors reaped an average 10.2% increase in salaries last year - up from 8% extra in 1996, while managers' pay jumped by 6.9% in 1997, up from 6.2% the previous year.

Research among 25,952 personnel at 584 firms shows directors earning an average #93,787 a year, while average pay among managers is #36,196.

Directors working in central London earn the most, an average of #145,197, followed by those in Scotland on #130,372.

Third in the regional pay stakes are directors in the West Midlands earning an average #117,075, while those in outer London are fourth, on an average #103,074.

Managers in Scotland earn an average #40,386 - below those in inner London on #46,449, but again above every other region including London suburbs.

The research shows that once again senior executives of firms fared better in the pay stakes than the UK population as a whole and, since 1973, the super-rich have become even richer relatively speaking.

Overall, the official average earnings index was up by 4% last year, but after taking inflation into account, directors were 6.9% better off in real terms, while managers' pay rose by 3.6% above inflation.

Since the institute's first survey 25 years ago, directors' pay has risen from four times the average salary to nearer six times that amount today.

Bonuses also play a big part in many employers' pay packets, with two in three getting a bonus last year.

Bonuses now account for nearly a sixth of executive pay - up from 15% in 1997 and 13% in 1995 - while overall executive pay rose by 7.2% in the year to January last, better than the previous year's 6.4% rise.

Researchers at the Institute of Management say the findings point towards sustained levels of profitability among UK firms over the past 12 months as well as emphasising the continued link between executive pay and company performance.

IM's director general, Mr Roger Young, said yesterday: ''The bonus culture has steadily grown in UK companies. Pay is now linked to profits and performance.

''While Chancellor Gordon Brown is right to warn about wage-related inflation, management pay increases are an indicator of the success of Britain's companies and the competitiveness of UK plc.''

More than one in four directors earn more than #100,000 a year and 3% get more than #250,000, with pensions and insurance firms handing out the biggest pay rises of up to 13.2%.

The research says the rises reflect the current buoyancy in the management employment market, with turnover at its highest level since 1990.

Eight in 10 firms recruited managers in the last 12 months - the highest level for more than 10 years. Among those recruiting, one in three is finding it difficult to fill vacancies.

Mr Paul Campfield, director of Remuneration Economics, said the survey's findings were a ''positive sign as Britain approaches the millennium''.

He added: ''These pay increases are a significant indicator that companies are prospering and are happy to pay bonuses and increase salaries above the current earnings index of 4%.''