A significant proportion of the UK’s privately held businesses reduced their headcount over the past year and many are planning to freeze pay over the next 12 months, according to research from Grant Thornton.

The accountancy firm’s International Business Report (IBR) surveyed 500 UK unlisted companies, including family and entrepreneurial businesses, and found that 49% cut their workforce last year compared to 24.7% in the previous 12 months. This equates to a -30% balance in 2010 compared to +15% in 2009.

Over the coming year, 44% of respondents said they had no plans to offer a pay rise, although only 5% say they will reduce the pay of their staff. 39% plan to increase salaries in line with inflation.

David Campbell, regional managing partner at Grant Thornton, said: "It's still tough out there for private companies in the UK with many facing severe financial pressures forcing them to reduce headcount to help stay afloat.

"With just under half of privately held businesses across the UK reducing staff  numbers over the year, there is a clear weakness in the current labour  market. The significant jump in the number of businesses that have reduced their headcount is very concerning, particularly if the trend continues."

Private businesses in the the South West, West and Wales experienced the greatest reduction in employees of all the UK regions, with 62.5% of PHBs reducing headcount, in sharp contrast to the 27% reporting cuts the year before. In London and the South, 52.9% of respondents said they would reduce staff numbers over the year (24% last year), while in the Midlands, 51.4% responded similarly (28% previously).

© Crimson Business Ltd. 2010