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Employers to cut jobs unless economy recovers

Employers may be forced to make significant jobs cuts unless the economy makes a recovery soon.

Research from the Chartered Institute of Personnel and Development (CIPD) has shown that employers across the UK have been holding on to their staff to retain skills, despite not having a demand for these employees.

CIPD figures showed that 1 in 3 firms were keeping high levels of staff to maintain their skills base, in a survey that was carried out across more than 1,000 employers.

The number of employers using these tactics means that the current jobs market remains sound, however 62% of private sector firms reported that they will be forced to cut labour if output or service delivery doesn’t improve in the next year.

Gerwyn Davies, Labour Market Adviser at the CIPD, said: “Recent falls in unemployment suggest that the labour market is on a sound footing, but a closer examination reveals that many employers are holding on to more staff than is required by the current level of demand in order to retain their skills.

“This is a make or break moment for employers - unless growth picks up many will find that they cannot hold on to some workers any longer.

“The tenacity with which employers are hanging on to skilled labour is a reflection of the high value they place on it and the damage they fear will be done to their businesses if they are forced to start making more redundancies.

“The spare capacity implied by the research suggests that firms are ready to increase their output quickly if demand grows. But there is only so long they can hold out for growth. The labour market is approaching a game-changing phase – one that could shape Britain’s capacity to compete for a generation.

“Private sector firms should be using any spare capacity they have to train, to innovate, or to focus staff in areas such as business development to help drive the medium-term prospects of their firm and the UK economy.”

CIPD’s report also shows that a third of firms expect to offer fewer entry-level positions in 10 years time.

Further findings show that salaries will see a 1.6% reduction, and average basic pay awards in the public sector may trail at 0.2% compared with 2.5% in the private sector.

Although the number of companies planning to make redundancies in the third quarter of 2012 has decreased from 32% to 29% in 3 months, this may change in the future if we do not see economic growth.

This was posted in Bdaily's Members' News section by Miranda Dobson .