Marcus Evans Group | Worldwide Headquarters | American Offices | Latin America | European Offices | African / Asian Offices

Unemployment likely to worsen as private sector resorts to redundancies

Employers remain nervous, according to study by CIPD – but UK economy expected to turn corner by mid-2012

Britons are facing their worst employment prospects since the recession thanks to a growing number of redundancies planned by private sector employers and deep job cuts in the public sector, a report warned on Monday.

Labour market experts at the Chartered Institute of Personnel and Development (CIPD) said their survey of employers points to a “widening chasm” between the north and south of the country for employment prospects.

The report paints a grim picture before official data is published this week, which is expected to show rising unemployment and a jump in the number of people signing on for jobless benefits.

A separate survey of business confidence from City accountancy group BDO suggests the economy will stand on firmer ground from the middle of the year. Although conditions remain tough – with the UK likely to enter recession after shrinking in the last quarter of 2011 – this downturn is likely to be shallower than in 2008-9, it believes.

The institute said nervous employers were reluctant to hire against a backdrop of slack demand, obstacles to securing bank loans and worries about skills shortages. Some were cutting their workforces.

“Whereas employers were in ‘wait and see’ mode three months ago, more private sector firms, particularly private sector services firms, have decided to push the redundancy button in response to worsening economic news,” said Gerwyn Davies, public policy adviser at the CIPD.

In a survey of 1,000 employers, the CIPD found that more were intending to cut staff than hire them. The net balance of -8 was the weakest since spring 2009, when Britain was mired in recession.

That echoes the picture from the latest official data, which showed that the north-east and north-west of England saw the largest increases in unemployment in the year to November. Davies said the disproportionate pain in the north was largely due to dominant employers suffering. “We have seen the gap between fortunes of jobseekers in the north and south grow due to sectors such as retail, health and social work and construction being the worst affected since the recession. This pattern looks set to continue for the foreseeable future,” he added.

In a separate outlook on Monday, the CBI is forecasting that lacklustre economic growth this year will be too weak to bring down unemployment. It says private sector employers are likely to hire about 100,000 people, partly offsetting public sector job cuts. But unemployment will rise to 2.87m this year and 2.91m in 2013.

The CBI director-general, John Cridland, conceded therere were uncertainties, not least in Europe. “Economic conditions will continue to be tough, especially in the first half of the year, and the UK recovery will depend on the successful resolution of the eurozone crisis,” he said.

“But some activity has picked up since before Christmas and the mood among many businesses has improved, with exception of companies serving the UK consumer, where business remains flat.”

The CBI’s 2012 growth forecast is higher than the 0.7% predicted last autumn by the Office for Budget Responsibility, whose forecasts are used by the Treasury. It contrasts even more markedly with a forecast for contraction of 0.1% from thinktank the National Institute of Economic and Social Research, which accused the government of deliberately damaging the economy with its unwavering austerity package.

The CBI stuck by its view that austerity was warranted to maintain financial market confidence in the UK. Its chief economic adviser, Ian McCafferty, said any stimulus from abandoning government spending cuts and tax rises would be offset by the kind of rise in bond yields that has put peripheral eurozone countries under so much pressure.

“The scope for loosening fiscal policy is relatively limited,” he said.

“We have a budget deficit that is not far short of that in Portugal at the moment but we are benefiting from interest rates not far off those in Germany.” © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds