Businesses are cutting back pay rises as optimism in the strength of the economy has begun to fade, harming hopes that a prolonged recovery could boost living standards.

Just 46.5pc of companies have given their workers a pay rise in the past year, according to a study from the Recruitment and Employment Confederation.

In the first half of 2017 more than two-thirds had given their staff a raise.

Unemployment is at its lowest level in more than 40 years and employers have complained of a skills shortage that could make it difficult to grow their businesses any further.

Yet this has not led to the sharp pick-up in wage growth that economists had anticipated.

Annual average weekly earnings grew by 2.4pc in the three months to June. This is the same level as inflation, indicating workers received no real-terms pay rise over the past year.