Workers at beleaguered steel giant Corus will not get a pay rise because the company needs to conserve 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 today that it did not expect an upturn in business in the short term and decided it was "inappropriate" to proceed with a pay review at all levels in the company. It also announced an operating loss of 200m for the first half of last year.

In a letter to the 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."

And he added: "I sincerely hope that you will appreciate the rationale behind this decision and trust that all of our employees will understand that this step is vital to the wellbeing of the company."

But the news came as a bitter blow to thousands of North-East workers who hoped the bad news was now behind them.

The Iron and Steel Trade Confederation accused Corus of further demoralising the morale of its workforce.

Eddie Lynch, Assistant General Secretary of the steel union, said: "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 added: "We need to go to the workers and explain it and see what their reaction is. I don't know what the reaction will be but it is not going to help morale but we will consult members and discuss it with our colleagues."