Companies still plan pay freezes

Despite reports that the UK economy is easing out of recession, pay freezes are still planned by half of all British companies, according to the CBI business group.

Reports deputy director-general John Cridland: "Market conditions continue to be very tough, and growth in 2010 is going to be feeble, so pay is going to be squeezed for some time to come."

He says that the private-sector has "adapted to new economic realities", with flexible working and pay freezes introduced to protect jobs.

And he warns that these hardships must be shared by the public sector. "Given the alarming state of the public finances, we must see similar pay restraint in the public sector," he said.

The CBI and recruitment firm Harvey Nash have found that just 4% of companies intend to award above-inflation pay rises.

The survey analyses data from 243 companies employing half a million people across the private and public sectors.

Mr Cridland says that although unemployment has reached 2.46 million, this is lower than first feared as workers give ground on pay and hours to avoid even worse cutbacks.

He says that although recruitment freezes are beginning to ease, companies are still wary over prospects next year and are planning to continue reining in pay.

At the same time, half of employers have cut the number of graduate opportunities, while half believe the UK is a less attractive place to do business than five years ago.

If they win power next year, the Conservatives reportedly plan a one-year pay freeze for all but the lowest-paid public-sector workers.