In a report published ahead of next week's comprehensive spending review, the firm stated that as many as 500,000 private employees could be laid off by 2014 due to the cutbacks, with private sector output falling by up to £46 billion.
"While private sector employment may be affected, this could be mitigated by increased labour market flexibility on wages and hours worked," said PwC chief economist John Hawksworth.
He added that the continued weakness of the employment market could benefit businesses by ensuring the Bank of England keeps interest rates low and predicted there will be some rise in private sector employment over the next five years.
Unison general secretary Dave Prentis claimed the survey's findings vindicate the union's stance on government spending cuts and criticised the government's "ideological obsession" with slashing public expenditure.
Posted by Cameron Thomson
