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Wage restraint likely in 2011

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A significant number of UK employers are looking at either freezing or reducing wages in 2011, a new survey has suggested.

The British Chambers of Commerce (BCC) polled some 450 firms across the UK and found that 49 per cent of respondents planned to keep salaries on hold and that 6 per cent intended to cut wages.

Nearly a half (45 per cent), though, reported that they were likely to offer employees pay rises.

Six out of 10 of the firms said they have already cut or frozen wages at some point during the past three years.

Businesses were also questioned on the effect that cuts in government spending will have on them.

While 38 per cent anticipated that reductions in public expenditure would have an adverse impact on profitability, only 13 per cent expected to lay off workers as a result.

Almost a quarter (26 per cent) did not regard the cuts as harmful to their business, but 18 per cent said they would delay investment plans as a result of the downturn in government spending.

Commenting on the survey, Dr Adam Marshall, the BCC’s director of policy, said: “Firms face a number of pressures moving into 2011. They have to contend with government spending cuts, increased regulation, and higher taxes thanks to increases in VAT and national insurance contributions.”

But Dr Marshall also pointed out that the last two years have shown that British firms will adopt a pragmatic approach to pay settlements in a tough environment.

He continued: “Despite a number of businesses suggesting that pay will be frozen, almost as many are suggesting wage rises in 2011.

“Equally, many businesses say they will deal with reductions in public spending by taking a hit on the bottom line, rather than by reducing staff numbers.

“This continues a trend we first saw during the recession: firms doing whatever they can to retain staff, even when conditions are more challenging.”