Private sector staff 'facing pay freeze and cuts in hours'

02/03/2009

A system of "pay apartheid" between public and private sector salaries is on its way due to the recession, a top business group has warned.

The Confederation of British Industry (CBI) said that up to a third of businesses are plotting cuts to working hours for staff.

In the report, a large majority of firms were also seen as planning pay freezes for their employees - making it harder for workers to pay off their personal debts and stretching budgets.

This comes in contrast to pre-agreed locked-in salary increases for many public sector workers.

David Frost, CBI director-general, said: "Across the country I am hearing more and more businesses left with no choice but to freeze and cut pay.

"It is unacceptable that the public sector should not share any of this pain. There is already an apartheid between the public and private sectors on pensions. We cannot have apartheid on pay too."

EuroDebt director Kevin Still added: "As a Debt Management Company we still feel that this is the lull before the storm, as loss of income becomes an increasing factor in households trying to balance the books every month. Using available credit facilities is extremely expensive and not viable for anything other exceptional expenditure items and we are now coming into the season of annual bills for council tax, water bills and other utilities.

"Many commuters have already been hit with large rises in their railfare season tickets and if some of the new credit card APR rises of over ten per cent to 14 per cent with some issuers are applied then the costs are prohibitive."

Analysts expect an extra million people to lose their jobs due to the credit crunch and economic downturn.

Unemployment currently stands just shy of two million.

Tags; Budgeting Advice, Young Family Finances, Recent Graduate Debt,

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