The class struggle is set to escalate sharply in the new year as workers and their families face soaring food and fuel prices, while employers say they will freeze wages.
With fuel and tax hikes pushing up food prices, more than half of UK companies plan to freeze or cut wages in 2011, according to a British Chambers of Commerce (BCC) survey of 450 businesses.
Forty-nine per cent of firms surveyed said they would freeze salaries, six per cent said they planned to reduce wages, while less than half (45 per cent) said they would give their staff a pay rise.
A BCC spokesman said the response showed that companies were taking a ‘pragmatic approach to pay settlements in a tough environment’.
Companies taking part in the survey were also asked about the impact of government spending cuts on their businesses.
Thirty-eight per cent of firms surveyed said cuts would have an impact on their profitability, and 13 per cent expected to axe jobs.
An AA spokesman warned motorists of an impending 0.76p rise in fuel duty, upon which VAT is also paid, on Saturday, January 1st.
This is on top of increased oil prices which have seen the average price of petrol go over 123 pence per litre in December.
And on next Tuesday, January 4th, petrol prices will rise even higher when VAT goes up from 17.5 per cent to 20 per cent.
Oil prices are up by almost 30 per cent since September (see Page 2), pushing up both pump prices and wholesale gas costs, having hit a low of around $40 a barrel at the end of 2008.
The AA December fuel report found that the cost of unleaded petrol is now at a new record high of 123.26p a litre, up 14 per cent on a year ago.
The price of a litre of diesel is 127.47p.
The price difference between unleaded and diesel has risen to 4.1 pence per litre.
The UK has the tenth highest unleaded price in Europe and the second highest diesel price, said the AA.
Meanwhile, with families struggling to cope, High Street retailers said they are expecting a tough 2011, with the impending VAT rise and fears about the economy eroding consumer demand.
Nearly two-thirds of big retailers surveyed by the British Retail Consortium (BRC) said they expected to do worse than in 2010.
The BRC surveyed 17 major retailers, accounting for 51 per cent of UK retailing by turnover, between November 22 and December 1st.
It found that 64 per cent of them thought retail sales would worsen in 2011, against 18 per cent who expected an improvement and 18 per cent who thought conditions would stay the same.
When asked what their biggest worries were, 82 per cent said weak consumer demand and 76 per cent cited inflationary pressures.
BRC director general Stephen Robertson said that the rise in Value Added Tax (VAT) was concerning traders, warning ‘our snapshot shows retailers expect a difficult December to be followed by a tough 2011’.
He added: ‘They believe the VAT rise will contribute to higher prices and, with fears about government cuts and the wider economy, people will be put off spending.’
Another survey, by analysts Synovate, showed a 22.8 per cent fall in the number of shoppers on Boxing Day this year.
The survey measured the number of people visiting more than 6,000 non-food stores on Sunday.