By Marcus Leach

A survey released by Vocalink has shown that private sector pay at UK listed companies has risen at the slowest rate on record.

According to the Vocalink FTSE 350 index earnings rose at an annualised rate of just 0.5% in the three months to February, a rate that is some way behind the consumer prices index (CPI) inflation, which at present stands at 4%.

The hardest hit were those in the manufacturing sector, where a 0.6% shrinkage of pay packets was reported in the same three month period.

"The findings corroborate Mervyn King's (Bank of England governor) view that UK households are currently being subjected to the most prolonged squeeze on real incomes since the 1920s,” said Marion King, Vocalink’s chief executive.

“With take home pay falling in real terms, the outlook for the consumer remains bleak this year and this could place significant downward pressure on growth."

The index is compiled by Vocalink - which provides payments services to banks - along with the Centre for Economic and Business Research, using salary payment data from over 200 of the FTSE 350 companies.

The slow rise in private sector earnings contrasts with a 1.3% increase in public sector take home pay during the same period, according to the research group.