Staff at Arla Foods UK are considering strike action over proposals for a company-wide pay freeze.

The Danish dairy giant last month proposed a pay freeze for the 3,000 unionised and non-unionised employees across its UK operation as part of the company's global cost reduction programme.

Four hundred of the 650 unionised workers have since indicated in a preliminary ballot that they would be prepared to take part in strike action, although this could not take place until a second secret ballot was held.

Any strike action could be hugely damaging to UK milk supply, with Arla responsible for about 28% of the liquid milk sold in supermarkets. However, an Arla spokeswoman insisted that talk of workers walking out was premature, adding that the company hoped to resolve the matter shortly. "We are in ongoing dialogue with the trade unions and are confident the situation can be resolved."

Usdaw said the disagreement was still ongoing but claimed it was moving negotiations forward.

"Usdaw is requesting to meet with Arla Foods as soon as possible, with the aim of coming to a mutually agreeable settlement. We hope this will be settled this month," said a spokeswoman.

The strike threat comes as an unwelcome distraction in the week Danish head office announced that overall net profit and turnover had fallen. In the six months to June this year, turnover was £2.6bn, down from £2.9bn over the same period last year.

Arla stressed that £202m of the £236m drop in turnover had been caused by the difference in exchange rates between the Swedish krona, sterling and the Danish kroner. Net profit also fell from £56.7m to £31m.

"The economic downturn is more extensive and prolonged and has impacted all Arla's markets," said Arla Foods CEO Peder Tuborgh. However, he stressed the results were in line with Arla's budget. "We are on the right course and we must continue to deliver the savings we identified in April," he said.