More than three out of four manufacturing firms are freezing pay, with little sign that the trend will change soon, according to a new report today.

A study of 158 settlements covering 25,766 employees by the Engineering Employers Federation showed average deals had slumped from 0.8 per cent to 0.3 per cent in recent months, the lowest since the group’s records began in 1987.

In the three months to the end of July last year the average settlement level was 3.2 per cent, illustrating the extent to which companies have had to respond to the severe economic conditions, said the EEF.

David Yeandle, the EEF’s head of employment policy, said: “This further sharp fall in manufacturing pay settlements is mainly due to the exceptionally high proportion of companies that are now freezing pay.

“Given the tough economic conditions and the need for companies to respond, there are no signs that this pattern will change in the near future.”