Forecast says jobs outlook grim with public sector likely to be worst hit

THE number of job losses looks set to double as the outlook for employment worsens and cuts spread to the public sector, a gloomy new report predicted today.

A survey of more than 700 employers also revealed a "substantial" fall in employment intentions in the public sector, marking a "difficult" first quarter for jobs.

The Chartered Institute of Personnel and Development (CIPD) said the jobs market was still "on the ropes", with a number of concerns ahead, including more outsourcing of work.

The study showed there was no overall return to growth in sight for jobs, with employers planning to cut staff by more than 6 per cent in the current quarter. More employers were planning to cut staff rather than hire new workers, and the outlook was particularly "bleak" in the public sector.

Public administration and defence will be particularly badly hit for jobs, it was warned.

John Philpott, chief economic adviser at the CIPD, said: "The UK jobs market is still on the ropes, with a public sector fall in employment now a reality as it feels the impact of the longest recession in modern times. Despite the jobs market proving resilient in recent months, this represents a mere pause for breath with the number of redundancies easing in the private sector and spending cuts yet to be felt by large swathes of the public sector.

"Unfortunately, there are more testing rounds ahead. Alongside the spectre of deep public spending cuts, the private sector will be dealing with ongoing concerns about productivity, wage costs and inflation.

"With many private sector companies looking to move jobs abroad in an attempt to find the right balance between skills, quality and cost reduction, the jobs market needs all the continued support and protection it is getting from the government."

The survey showed that one in ten private firms planned to outsource jobs abroad this year to countries including India and those in Eastern Europe.

Alan Downey, head of public sector at KPMG, which helped with the research, added: "These figures clearly show that the starting gun for a public sector recession has been fired. It is now only a matter of time before we are faced with the deepest and most prolonged cuts in public expenditure that anyone can remember.

"In fact, many public sector bodies have already started to feel the pain and are drawing up clear and radical plans to reduce costs. By definition that means identifying those services that are of lower priority and must be scaled back or terminated altogether.

"Reducing the pay bill, whether through a pay freeze or headcount reductions, or both, is an obvious way to cut costs quickly. Other options that need to be seriously addressed include: consolidating operations to improve efficiency and release property and other assets for disposal; and reconfiguring service delivery in order to reduce costs while maintaining quality.

"Some of this can be achieved quickly, but many of the changes that are needed will require careful planning. Plans need to be made now, so that the public sector is ready to respond immediately, whenever the incoming government decides it is time for the axe to fall."

The report was published ahead of new unemployment figures on Wednesday which are expected to show that about 2.5 million people are out of work.