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• Bonus payments have been reduced sharply
• First pay decline since records began in 2001
Sharply reduced bonus payments across Britain's finance industry have triggered the first decline in UK weekly pay since records began in 2001.
Average weekly wages fell by 2.2% in January from a year ago, official figures showed today. Pay averaged £446.50 a week, compared with £456.40 in January 2008.
People working in the private sector saw their weekly pay fall by 3.4% to an average £448 - also the first fall on record. By contrast, public sector workers enjoyed a 3.4% rise in weekly wages to £441, closing the gap with private sector companies.
The Office for National Statistics said average bonuses in the private sector fell by 42% to £34.70. Many banks have sharply cut bonuses and laid off thousands of staff.
Excluding the bonus effect, private sector pay would have been up by 2.4%.
A number of companies have already imposed pay freezes and some have even reduced pay. Workers at Honda's car plant in Swindon face a 10% pay cut this year, while Vodafone is freezing the salaries of its 10,000 UK staff and will probably scrap bonuses.
With unemployment now topping 2 million, the fear of being laid off has also deterred some workers from asking for pay rises this year.
Howard Archer at IHS Global Insight said: "Earnings growth seems certain to retreat appreciably in 2009 given that unemployment is soaring, retail prices were flat year-on-year in February - many pay awards are still linked to this measure of inflation and it is set to go negative in the March data - and companies are desperate to keep down their costs in the face of deteriorating demand and profitability.
"Indeed, a growing number of workers are likely to suffer wage freezes or even pay cuts."
He added that falling earnings will reduce consumer spending in coming months, pulling down overall economic output, which he thinks will fall by close to 4% this year.
The ONS figures also showed that wages in manufacturing rose 1.5% on the year to £494.10 while pay in the services sector, which accounts for three-quarters of the economy, fell a record 3.1% to £433.60.
The EEF manufacturers' organisation released separate numbers showing that pay settlements averaged 1.7% in the three months to February, down from 1.8% in the previous three months. It is the lowest figure since the survey began in 1987.
The number of companies that have frozen pay rose to nearly 45% of all pay deals while those deferring their pay settlement climbed to just over 20%.
David Yeandle, the EEF's head of employment policy, said: "This further fall in settlement levels and increase in the number of companies either freezing or deferring pay clearly shows the severe impact that the economic downturn is now having on manufacturers. Government needs to support the growing number of companies that have introduced short-time working as one way of coping with these difficult times by providing them with some financial assistance."
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