A report from YouGov independent price comparison and switching service uSwitch.com reveals the recession is far from over for millions of consumers. Despite the economy being on the mend, over 16 million workers (57%) do not expect a pay rise this year, and those who do can expect a rise of just 1.9% - a net monthly increase of £27.
The average gross salary this year after a 1.9% increase will be £24,425, but the report highlights the gap between public and private-sector pay is shrinking. 2010 pay rises show a 26% gap between the two groups compared with a 66% gap in 2008. Public- sector workers are set to take home an extra £23 a month while those in the private sector can expect an additional £35 in their pockets.
Despite the closing gap, nurses, civil servants and teachers believe that they face a particularly gloomy year. While 40% of nurses surveyed do not expect any increase this year, those responding more positively estimate a 1.4% rise; 43% of teachers do not expect a rise but those who do anticipate a 1.8% boost; and while over half (53%) of civil servants foresee a zero increase, the lucky few expect a 1.6% rise. According to the report, among those set to be best off this year are bankers and lawyers, anticipating pay rises of 2.7% and 2.9% respectively.
And with the cost of living rising at nearly double the rate of salaries, 5.4 million consumers (11%) are spending more than they earn while over one in four (26%) have nothing left in their bank accounts at the end of the month.
With the majority of those asked seeing no clear signs of recovery on the horizon in terms of pay, 31% of consumers believe they will be worse off this year than last.
Nearly half (48%) of those spending more than they earn rely on overdrafts to fill the gap between their income and their outgoings, while over a third (34%) use credit cards to keep them afloat. The nation's love affair with plastic shows no sign of letting up with 21 million using their credit card at least once a month, up 4% from 2007. Excluding mortgages, the average household debt in the UK is £9,000, which increases to £18,722 when unsecured loans are taken into account. In total, households are faced with average debts of £57,937 including mortgages.
According to the Bank of England, January's 3.5% inflation spike was directly due to three factors: the rise in VAT from 15% to 17.5%, a 70% increase in oil prices and the impact of a sharp fall in sterling in 2007 and 2008 which pushed up import prices. While these factors are considered to be temporary, the Bank's prediction that inflation is likely to remain above the Government's 2% target for the next few months offers no comfort to the millions of homes struggling to make ends meet.
Ann Robinson, director of consumer policy at uSwitch.com, said: "The Government is going to have a hard time persuading people that things are on the up when over half the workforce is witnessing a 0% pay rise. This will do nothing to improve consumer confidence - a key factor if the economy is to claw its way out of recession. "Taking second or third jobs to fund lifestyles is becoming increasingly difficult for a nation that already works the longest hours in Europe.
"Consumers face a double threat - the Government is toying with measures such as raising taxes to reduce the public deficit, which will have a direct impact on personal finances. When coupled with lower than anticipated salary increases it can only mean that we are in for a bumpy ride, and the situation could get worse before it gets better.
"With the pay crunch continuing to bite, consumers need to start paying serious attention to their spending habits. Short-term debt solutions may seem an efficient way to fund spending, but they can lead to severe long-term debt issues if not managed properly. Consumers have little scope for reducing their own budget deficits unless they work harder to strip down their essential bills to the bare minimum, rather than continue to plug the hole by borrowing."