Employers, unions and pay experts gave warning yesterday that pay cuts could sweep across industry as companies attempt to reduce costs while retaining skilled staff. The CBI said that even such imaginative moves would not be enough to avoid large-scale job losses in the coming months.

The forecasts came after Corus, the Anglo-Dutch steelmaker, suggested a 10 per cent pay cut to its 25,000 British employees to save jobs. The proposal was rejected by unions yesterday.

The move by the steelmaker comes after pay cuts were agreed at JCB to help to save jobs, although redundancies at the digger manufacturer followed in any case.

Keith Hazlewood, national official with the GMB union, said: “There is every possibility that this will become a trend. I am anticipating it from other companies. From the company’s point of view they are trying to keep hold of skilled staff because it would be disastrous for them if they lost the vital skills they need to help them through the current problems.”

A spokesman for the EEF manufacturers’ organisation said: “It would be highly unusual for companies not to consider such action because of the speed of deterioration in the sector.”

Cuts could begin in earnest next month when traditionally a large number of pay negotiations are held.

John Cridland, deputy director-general of the CBI, said: “It is an interesting idea and employers at the moment are quite desperate for any extra tools in their toolbox. But it would be wrong to present wage reductions as a panacea because companies cannot avoid laying off large amounts of labour.”

Jon Terry, head of reward consulting services at PricewaterhouseCoopers, said: “Industries are having to cut costs and cutting employment costs is a way to do this. They can do this through redundancy, flexible working, cutting pension contributions and pay cuts. Mid-tier companies outside the FTSE are more likely to offer pay cuts than go through redundancy.”

In Britain’s beleaguered car industry companies have been trying to reduce wage costs while they implement heavy production cuts by time-banking. The system operates by paying employees when they are sent home in quiet periods but then taking back the extra time when the factories are busy.

Meanwhile at Corus, the pay cut plan is expected to be raised again but it is far from being agreed. Representatives from the heavily unionised work-force met yesterday to discuss a range of proposals before resuming negotiations today. A joint statement from Community, Unite and the GMB, said of the plan to reduce pay: “

The company’s proposal for a 10 per cent cut was one of a range of options which so far have been rejected by the unions. Before there is an agreement on the future of the 25,000 employees, the unions are demanding that Corus makes clear its intentions for 2009.”

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