The Pay Squeeze

A survey of more than 1,000 firms, published on Monday by the Chartered Institute of Personnel and Development (CIPD) and the employment agency Adecco Group, suggests that businesses believe average pay rises this year will be just 1%.

That is the lowest figure for three years and well below the 1.5% the same survey suggested three months ago.

"The bad news is that there is a real risk that a significant proportion of workers will see a fall in their living standards as the year progresses, due to a slowdown in basic pay and expectations of inflation increases over the next few months." said Gerwyn Davies of the CIPD.

With inflation at 2.3% - a figure that is expected to rise sharply when April's number is published on Tuesday - employers are clearly not preparing for higher wage settlements.

People in work are also suffering an overhang from the financial crisis, which left many under threat of unemployment. That did not materialise, with employees often sacrificing wage increases for job security. The recession of 2009 also meant that businesses invested less in profit-enhancing improvements such as new machinery or technological enhancements.

In the time it takes a British worker to earn £1, a German worker has earned £1.35. UK productivity is also below that of France and America, and is not likely to return to its trend growth level of 2% per annum until 2020.