Jobs

Gloomy outlook brings job creation to a 'virtual standstill'

November 10, 2008

Job creation is at a "virtual standstill" as employers become increasingly gloomy about prospects for the economy in the wake of the worsening downturn, while smaller firms are cutting staff for the first time in 18 months, new research revealed today.

A survey of over 700 employers showed that the balance between the proportion expecting to recruit staff in the next three months and those lining up to make redundancies has plunged from plus 41 a year ago to just plus 2 now.

The Chartered Institute of Personnel and Development (CIPD) said it was the lowest figure since it launched its labour market outlook survey over four years ago.

A separate report by the CBI showed a huge fall in jobs at small to medium sized manufacturers, with employment prospects expected to get worse in the next few months.

Demand for UK-made goods at home and abroad had weakened during the global economic slowdown, said the CBI after surveying almost 500 firms.

Investment plans had been scaled back, especially on spending on buildings.

Russel Griggs of the CBI said: "After more than a year of steady growth on the jobs front, we are now starting to see SMEs (small and medium sized enterprises) reducing their headcount in response to weakening demand in the face of global economic slowdown.

"Given the speed at which the downturn has hit every sector of the economy it is not surprising that small and medium-sized businesses are also seeing orders and output hit - both at home and abroad - despite the relief provided by falling commodity prices.

"It is worrying that more SMEs are finding a lack of credit affecting business decisions. But the bold rate cuts of recent weeks and measures to support SMEs should help prevent a further credit squeeze but the impact is unlikely to be immediate."

More than four out of five employers polled by the CIPD said they believed economic conditions in the UK will get worse, with a mere 1% predicting an improvement, according to the report, published ahead of new unemployment figures on Wednesday which are expected to show another rise in the UK's jobless total.

The next round of pay rises, excluding bonuses, were expected to average 3.5%, down on the summer's 3.7%, but including bonuses the predicted figure was 4%, up by 0.1% on earlier in the year.

CIPD chief economist John Philpott, says: "The year since the impact of the credit crunch was first felt saw the UK labour market move from a state of buoyancy to one of stagnation.

"We are now at the start of a period of contraction, with jobs being lost, new jobs hard to come by and, as this week's official statistics are set to confirm, unemployment on an ever sharper upward rise.

"With pay increases at best modest for those still in work the harsh chill of recession will make this the toughest winter for UK households for almost two decades."

Andrew Smith, chief economist at KPMG, which helped with the study, added: "While the pressures on business to control spending - both on staff and in other areas - are real and intensifying, there has to be a balance between cutting costs now and the risk of lasting damage to the business through inadequate investment for the longer term."

Another study by market research company Nielsen and the British Retail Consortium showed that consumer confidence had fallen to new record lows.

More than eight out of 10 people said they believed the country was in recession, up from 65% in May, with fewer than one in five believing the UK will be out of recession within a year.

The dip in confidence was driven by an increase in the number of people becoming concerned about job prospects, according to the survey of 500 adults.

Stephen Roberts, British Retail Consortium director general said: "With only one in five people believing recession will be over this time next year, it's certainly going to be a tough Christmas and New Year.

"But there are reasons for optimism. The Bank of England's shock rate cut should get the economy's heart beating again. Some key costs are falling, bringing shop prices down, and retailers are fighting back with promotions and price cuts. This can be a good time to be a customer."

Unemployment increased by 164,000 to almost 1.8 million between June and August, the biggest quarterly rise since the early 1990s, and some analysts are predicting that the figure could reach two million by the end of the year.

A spate of fresh job cuts have been announced in the past week, including hundreds at car giant Jaguar Land Rover and steel firm Corus as industry continues to be hit by the economic downturn.