Stark jobs warning as half of UK's firms look to make cuts

Published on Thursday 6 August 2009 21:28

HALF of British companies are looking to cut their workforce in the next six months, business leaders are warning.

Publishing its latest business survey today, the British Chambers of Commerce (BCC) said its findings showed that the government had to continue taking measures to stimulate economic growth and boost jobs.

The threat of sweeping job cuts would appear to fly in the face of recent upbeat data on the economy, but unemployment is a lagging indicator and analysts expect Britain's jobless total to push well past three million next year before falling back in 2011.

Of the 450 firms polled by the BCC, one in ten firms said they were certain to make staff redundant in the coming months and a further 41 per cent replied that they were considering reducing their workforce.

Half of those quizzed did not believe the UK would see a return to economic growth until the first half of 2010.

Adam Marshall, director of policy at the BCC, said: "With half of firms still thinking about cutting their workforce by the end of the year, the government must continue to promote measures that stimulate growth in investment and jobs.

"It will be business that drives an economic recovery, boosting employment along the way. Policies to help businesses retain jobs, and increase employment, will be critical over the next 12 months. Scrapping plans to raise National Insurance contributions in 2011 is an obvious place to start."

Today's survey coincides with a poll of 175 companies across Scotland, conducted by the Scottish Chambers of Commerce (SCC), which found businesses are shying away from increasing stock levels as they hold out for long-term recovery.

The majority of those questioned said they would only maintain current levels, while 12 per cent plan to cut their stock in the next three months and none planned to increase levels.

The survey also revealed that most firms expect economic recovery later, rather than sooner.

Asked which of the next four quarters they expected to see recovery, more than half picked either the last quarter or "later".

Liz Cameron, chief executive of the SCC, said businesses north of the Border were prepared for "the long haul" to recovery.

"Not surprisingly businesses are in a prudent mode," she said. "We look to government to support the recovery by appropriate measures, but at the end of the day it will be business itself that drives an economic recovery, boosting employment along the way.

"Policies to help businesses retain jobs, increase employment and remain competitive, will

be critical over the next 12 months."

The chambers' research also showed that more than four out of five firms in the UK had not been affected by swine flu.

Yesterday, the Bank of England announced it was pumping an extra 50 billion into the flagging UK economy.

The surprise move – taking efforts to boost the money supply to 175bn through the central bank's quantitative easing programme – appeared to pour cold water on rising hopes that the UK will bounce back quickly from recession.

Howard Archer, chief UK economist at forecasting group IHS Global Insight, said: "Bank lending to businesses remains very weak and spreads on bank loans are elevated, which is a serious threat to recovery prospects."

Ed Monaghan, managing director of Scottish house builder Mactaggart & Mickel, added: "The quantitative easing programme is pumping money back on to the balance sheets of the banks. Despite this, the banks continue to restrict access to lending."