The widespread cap on pay increases brought on by the recession shows no sign of ending this year.

The widespread cap on pay increases brought on by the recession shows no sign of ending this year.

A survey by professional services firm Grant Thornton of 500 UK private companies shows that over the next 12 months 44 per cent of respondents do not plan to offer a pay rise to employees, while 5 per cent say they will actually reduce the pay of their staff.

The research also reveals that 49 per cent of the respondents cut their workforce during the past 12 months. The South West, West and Wales experienced the greatest reduction in employees of all the UK regions with 62.5 per cent reducing headcount; a sharp contrast to the 27 per cent reporting cuts the year before.

David Campbell, head of privately held businesses and regional managing partner at Grant Thornton, says: ‘It’s still tough out there for private companies in the UK with many facing severe financial pressures which have forced them to reduce headcount.
 
‘A reduced headcount for businesses will no doubt have a knock-on effect on household incomes, slowing the country’s economic recovery. With [minimal growth] in the fourth quarter of 2009, it is clear we have a long way to go.’