The persistent squeeze on the employee pay packet is an indication that companies do not see economic conditions dramatically improving in 2010, despite hopes that the end of the recession may have arrived in the final quarter of 2009.

A very fragile recovery was highlighted in the survey, as a majority of firms (67 per cent) stated that they would operate at the same or reduced capacity levels in the first quarter of 2010. This is a strong indicator that businesses believe demand and the trading environment will remain uncertain.This trend continues from November’s survey, when companies stated that a lack of customer demand was the biggest obstacle over the next 12 months.

This reflects the further revision to 2009’s third quarter GDP figures. David Kern, BCC’s chief economist said: “The upward revision to Q3 GDP was smaller than expected. The figures confirm that the UK has made slower progress exiting the recession than many other major economies. “While most analysts expect a return to positive growth in the next few months it is important to stress that recovery is not yet guaranteed.”