Thousands of jobs are expected to go at WPP, the advertising group, and Sage, the software company, as the recession spreads beyond the banking and manufacturing sectors and into the service industries.

WPP, which eliminated 3,600 positions in the first quarter, is expected to reduce its headcount by a further 3,400 by the end of the year. The overall number represents about 6 per cent of WPP's global workforce and will include many positions in the UK.

The number of job losses will be much higher than previously anticipated. They are based on WPP's indication last week that like-for-like revenues would decline by about 5 per cent in 2009 — about double the reduction that Sir Martin Sorrell, its chief executive, had forecast two months ago. Like rivals such as Omnicom and IPG, WPP is being pummelled as companies rein in their advertising budgets. About 3,700 of the positions that WPP is expected to eliminate this year will be redundancies, with the remainder made up by attrition.

The WPP job losses emerged as expectations that Sage, which supplies software and IT support to small and medium-sized businesses worldwide, would cut a further 600 positions this year, on top of cutting 400 staff last year. About a fifth of the 1,000 jobs lost in 2008 and 2009 — from Sage's 14,500-strong global workforce — will be made in Britain as part of a drive to reduce annual costs by an estimated £50 million. It is understood that all of Sage's 2,200 UK staff are eligible to apply for voluntary redundancy.

Sage, which serves almost six million businesses worldwide, gave warning three months ago of “particularly challenging market conditions”. America accounts for the largest share of Sage's revenues, at just under 40 per cent, with the UK comprising nearly a fifth.

Sage has not confirmed how many positions it eliminated last year or how many cuts it expects to make this year. Nor is the company expected to comment on redundancies when it reports its interim results on Wednesday. Instead, Sage will update shareholders at its results presentation on how its broader drive to cut costs is progressing.

WPP and Sage declined to comment on any job cuts that may occur in the future.

The planned WPP and Sage job cuts came to light after a week in which BAE Systems, Britain's biggest defence contractor, said that it would cut 500 jobs across the UK. The losses, announced on Thursday, the day that Britain formally withdrew its troops from Iraq, will come from the closure of factories in Guildford, Leeds and Telford, which make Army vehicles and weapons. Jobs will also be lost in Newcastle, Leicester and Barrow.

The BAE staff cuts followed an announcement by Vestas, the Danish company that supplies 20 per cent of the global wind turbine market, that it would cut 600 jobs in Britain. The jobs will go at its Isle of Wight factory as a result of sluggish demand for turbines in the UK and Northern Europe.

Furthermore, it emerged last week that 58 per cent of UK businesses are planning pay freezes this year, abandoning the practice of giving automatic annual increases, in the face of dwindling inflation and a brutal cash squeeze. A further 12 per cent are planning to cut wages, according to the poll, conducted by the British Chambers of Commerce.

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