Millions of people who work in the private sector face having their pay frozen or cut next year, employers have warned.

David Frost, director-general of the British Chambers of Commerce (BCC), said: “First of all employers talked of pay freezes, but in the last two weeks directors have started talking to me about reducing pay next year.

“This is the third recession I’ve seen, and I’ve never seen employers cutting wages before. This shows how bad things have got – nothing is now off limits. If this keeps more people in work it’s surely the better of two evils.”

The BCC polled a sample of 300 member firms and found that 43% planned to freeze wages and salaries in 2009. A further 9% will cut pay – a measure almost unprecedented in the experience of today’s workers.

In the City, Deutsche Bank, Barclays Capital and Royal Bank of Scotland have all cut the pay of IT workers. JP Morgan is cutting the amount it pays IT contractors by 15%.

BDO Stoy Hayward, one of the UK’s biggest accountancy firms, is to pay its partners 30% less next year. Fund managers at Schroders and Fidelity have also had their pay cut for next year.

Pay freezes have become increasingly common among manufacturers. According to the Engineering Employers Federation, a quarter of firms will keep pay levels the same in 2009. The newspaper groups Trinity Mirror and Johnston Press have already introduced pay freezes for next year.

Miles Templeman, director-general of the Institute of Directors, said: “We are now seeing wages being cut in a variety of sectors: manufacturing, engineering, catering, but also white-collar professions such as law and accountancy. Usually employers talk of reducing pay by 10%.”

Firms looking to cut pay must win agreement from staff, a trade union or staff association. More than 2,500 staff at JCB, the manufacturer of construction vehicles, agreed in October to be paid about £50 a week less to keep their jobs. The move reduced the number of proposed redundancies from 500 to 178.

However, trade unions have intervened to block proposals by two big employers to cut pay. Corus, previously British Steel, had intended to slash the wages of 25,000 staff by 10%. A similar plan at Vauxhall, the car manufacturer, was also rejected by union officials.

As hundreds of thousands of businesses in the private sector face up to the recession, the BCC and the Institute of Directors are calling for the public sector to share the pain.

Most civil servants and other state workers are in line for a pay rise of 2% in 2009.

Frost said: “I look at the continuing pay rises and creation of jobs in the public sector and it’s a different world from the one the rest of us live in. It’s as if they don’t understand how bad this recession is.”

The BCC is also calling for the national minimum wage to be frozen this year to help small businesses. It stands at £5.73 an hour for workers aged over 22 but is set to rise by an as yet undecided amount in October.

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