The 2009 UK recession has had a massive impact on recruitment and pay.

Two fifths of companies have frozen graduate recruitment, while more than half of employers are going to freeze pay during the next pay round, according to new research from the Confederation of British Industry (CBI) and recruitment company Harvey Nash.

Of the companies surveyed, whose employees totalled three million, the recession and rising unemployment is shown to have had an impact on salaries, recruitment and training. Almost two thirds of businesses have frozen recruitment across the entire organisation, while 10% are recruiting fewer graduates than in 2008.

Perhaps most worrying is the fact that more than an quarter of organisations plan to transfer work overseas in response to skills shortages and the UK economic downturn.

Albert Ellis, Harvey Nash CEO, said: “The recession has led to fundamental changes in the way employers recruit, motivate and develop employees, and UK plc must act fast to keep highly skilled talent in the UK labour market. Otherwise, we run the risk of conceding out competitive edge to other countries.

“Without a more proactive approach to training, accommodating and retaining talent, businesses risk missing out on the next generation of skills needed to compete. We have a wealth of knowledge, experience and skills in the UK that must be nurtured and developed, even in troubled times, for the future of the British economy.”

Around 44% of companies are planning to cut back on training budgets and 23% are cutting back on apprenticeships, although 10% are expanding their existing schemes.

John Cridland, CBI Deputy Director-General, was positive about the future: “While pay and recruitment freezes should disappear as the economy recovers, the spirit of flexibility and the willingness of many staff to engage positively with employers on these issues will hopefully be a more permanent benefit of the UK economy.”