Millions in Britain face pay freezes, salary cuts in 2010

LONDON: The new year is going to be a cold one for the salaried class in Britain as millions of people are likely to see their spending power slashed again in 2010 due to salary cuts and pay freezes, a media report says.

"Millions of people face a second year of pay freezes or salary cuts next year dashing hopes that the end of the recession will ease the squeeze on family budgets," the Sunday Times said.

Up to two-thirds of companies in the private sector are planning to freeze or cut pay next year -- a substantial increase compared with this year, the newspaper said.

Quoting a poll by the British Chambers of Commerce (BCC), the daily said 58 per cent of company directors were planning wage freezes during 2010 and another 5 per cent planned to cut pay next year.

This grim forecast has, however, enraged union leaders and brought a series of strike-threats for slashing workers' spending power for the second year running.


Unions said the state of the economy should not be used as an "excuse" to impose pay freezes by companies continuing to make profits.

Derek Simpson, Joint General Secretary of Unite, the biggest trade union in Britain with two million members told the Sunday Times, "Our members have been prepared to share the pain and take pay freezes this year. But we will challenge any attempt to freeze pay in companies that are making profits next year."

British Airways, Hewlett-Packard, Fujitsu, Swinton insurance and Ladbrokes have already announced plans to freeze pay next year.

Citing BCC Director General David Frost the daily said, "we face a tough year ahead -- it will be a really long haul. The stark reality is that business finances are still under incredible pressure and they are doing everything they can to keep hold of cash."

Despite signs of economic growth, millions of consumers face a bleak 2010.

Value added tax (VAT) is set to rise to 17.5 per cent this week, unemployment is expected to increase further and City forecasters predict interest rates to rise later in the year. Personal tax allowances will be frozen in April when the new 50 per cent income tax rate also comes in, the report added.

Britain is predicted to have moved out of recession during the final quarter of this year, the last of the leading European economies to do so.