Unions representing steelworkers have offered to take a 10 per cent pay cut across Corus's entire UK workforce of 25,000 in a desperate attempt to save a large factory in south Wales from closure.

The negotiations, prompted by the acute downturn in the global steel market, have much wider implications for other British and European workers as companies seek cost cuts.

The Corus move is part of a growing trend as companies such as Irish stockbroker Davy, French broker CLSA and UK engineer JCB seek innovative ways to cut costs without firing people, at a time of low inflation.

Several thousand workers at JCB, the construction equipment group, have agreed to a pay cut in return for avoiding redundancies, a deal that ministers believe could be copied widely during the downturn.

With retail price index inflation expected to turn negative in 2009, many other companies have imposed pay freezes.

The three unions representing Corus workers have discussed with the company the option of cutting wages by 10 per cent for six months. "Representatives would accept a 10 per cent decrease for everybody, from the bottom to the top of the company," said one senior official.

Unions fear that management wishes to press ahead with an alternative solution that could include the closure of Llanwern, Newport, one of the last remaining steel factories in the UK.

The steelmaking part of Llanwern was shut in 2001 with 1,300 redundancies but the site still makes steel sheets and employs more than 1,000 people.

India's Tata Group, which bought the Anglo-Dutch company last year, has said it wants to cut costs by £350m in both the UK and the Netherlands as it cuts production by 30 per cent.

Workers have already agreed cuts in overtime and bonuses but management is pushing for more. A "no job cuts" agreement between the two sides expires in December. Corus has temporarily shut some blast furnaces in Port Talbot, Scunthorpe, and Ijmuiden in the Netherlands.

Union officials still hope that the mothballing or closure of Llanwern could be avoided in return for the pay cut. Talks between the unions take place on Thursday and they are expected to meet Corus for more discussions in the next fortnight.

Corus said it had discussed with its unions a number of proposals related to cost savings. But "at this stage no recommendations have been finalised".

Job cuts announced this week include 16,000 worldwide by Sony and 14,000 by Rio Tinto while 32,000 workers are under threat from the collapse of Woolworths.

Malcolm Barr, chief economist at JPMorgan, said that flexible working agreements had helped the private sector emerge intact from the 2001 "mini-recession".

He warned such deals could not stave off job cuts indefinitely. "The problem we face is there are some shocks just too big to be absorbed through that channel. There is only so much change which you can absorb by flexibility in terms of pay."

John Monks, general secretary of the European Trade Union Confederation, told the Financial Times on Wednesday that the economic crisis should prompt a turning point in industrial relations, with unions and managers working more closely together.