WORKERS at beleaguered steel company Corus will not get a pay rise because the company needs to save cash.

Last February, the Anglo-Dutch company shed 6,000 jobs across the country including 1,100 on Teesside blaming over-capacity in the market and the strength of the pound against the euro.

But the company said yesterday that it did not expect an upturn in business in the short term and decided it was inappropriate to proceed with a pay review.

It also announced an operating loss of £200m for the first half of last year.

In a letter to unions, executive director Allan Johnston said: "The current and forecast business climate shows no real sign of improvement in the short term, particularly in the UK manufacturing sector, and conservation of cash therefore continues to be the critical priority for the company, in order to see us through this difficult period.

"I sincerely hope that you will appreciate the rationale behind this decision."

But the news came as a bitter blow to thousands of workers in the North-East.

The Iron and Steel Trade Confederation condemned the company for further demoralising its workforce.

Eddie Lynch, assistant general secretary of the union, said last night: "The decision by Corus to impose a pay freeze is a bitter blow for its employees, who have endured a miserable 12 months. Morale at the company is at rock-bottom."

Tony Poynter, chairman of the multi-union steel committee on Teesside, said: "We need to go to the workers and explain it and see what their reaction is.

"I do not know what the reaction will be, but it is not going to help morale. We will consult members and discuss it with our colleagues."

A Corus spokesman said last night that all costs, including employment costs, would continue to be a major focus for Corus.

"The company position is that proceeding with a pay review for 2002 would therefore be inappropriate," he said.