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More pay freezes on the way in 2010

While the UK government has already issued a statement confirming that public sector wages will only rise by a maximum of 1% during 2010 and possibly 2011, it would appear that the private sector has taken a harsher approach to the problem. One in five UK companies are looking towards a pay freeze in 2010 and reducing or scrapping benefits such as bonuses and gym memberships for employees. At a time when the UK economy is supposedly recovering, it is interesting to see more and more companies introducing cost-cutting exercises to assist with cash flow and overall company finances.

However, these pay freezes will have an impact upon the UK economy as a whole and will see less disposable income available for "luxury purchases". When you consider that inflation is now moving back into positive territory, and there will be an increase in the cost base of many businesses in the UK, an inability to push through price rises for their products and services will obviously squeeze their profit margins. A squeezing of the profit margin of any business is likely to result in further cost cuts which would mean less disposable income in the UK and a vicious circle begins to form.

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