More redundancies and a substantial fall in employment intentions in the public sector marks a difficult quarter for the jobs market, despite the UK’s emergence from recession. These are the main findings from the latest CIPD/KPMG quarterly Labour Market Outlook survey of over 700 employers.

The survey, conducted by IPSOS Mori, indicates no overall return to growth in sight for the jobs market. Redundancies look set to almost double this quarter, compared with the final quarter of 2009, among those employers that plan to make redundancies. Those employers that plan to make redundancies expect on average to cut 6.2% of their workforce in the first quarter of 2010, compared with 3.8% in the previous quarter.

And despite signs that some private sector employers are emerging from the recession with intentions to increase staff levels, the overall net balance between the percentage of employers expecting to recruit and those expecting to cut staff across all sectors of the economy is still negative (-5%). This represents a fall from -3% in the previous quarter.

The findings show that this negative growth is almost wholly down to a bleak quarter ahead for the public sector, which recorded -31% (down from -13% in the previous quarter). The public administration and defence (-62%) sector looks set to be hit particularly hard. This compares with more positive feedback from the private sector (+5%), which will see staff numbers grow for the first time since the start of the recession. Prospects for private sector services (+12%) will continue to improve, with manufacturing and production still struggling (-4%).

This divide extends also to pay prospects, with the private sector predicting a rise of 2% compared with under 1% (0.9%) for the public sector at the next pay award. The average basic increase at the next pay award is predicted to be 1.5% on average.

John Philpott, Chief Economic Adviser at the Chartered Institute of Personnel and Development (CIPD) says: “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 while, the number of redundancies has eased in the private sector and cuts yet to be felt in the public sector, this represents a mere pause for breath.

“Unfortunately, there are more punishing rounds ahead. The private sector will be dealing with ongoing concerns about productivity, wage costs and inflation alongside the spectre of deep public spending cuts. 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 LMO survey also identifies outsourcing jobs abroad as a medium-term concern for the UK economy. Ten per cent of private sector companies plan to outsource jobs abroad in 2010. Among those companies, almost half (44%) of IT companies plan to relocate jobs to other countries, while almost one in five (17%) manufacturing companies plan to outsource employment abroad. More than half plan to relocate UK jobs to India, while a third (37%) plans to shift jobs to Eastern Europe.

Alan Downey, Head of Public Sector at KPMG, says: “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.”

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