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UK - Braced for a slow, painful employment contraction

14 November 2011

UK employers are scaling back on all employment-related operations, with fewer organisations planning to offshore jobs abroad and recruit overseas workers against a backdrop of less recruitment and fewer redundancies. This is the key finding from the latest autumn Labour Market Outlook report published by the Chartered Institute of Personnel and Development's (CIPD). The survey contains the response of more than 1,000 employers.
 
The employment situation will deteriorate further in the fourth quarter of 2011, with the Labour Market Outlook net employment index having fallen to -3 from -1 in the past three months. This is the second successive quarterly fall and the lowest net balance since last winter. Medium-term prospects are no better, with the twelve-month index also recording -2. The private sector looks set to grow in the next three months (+20), but at a slower pace than in recent quarters.  Confidence in the public sector remains low (-50) for the next three months and is even lower for the year ahead (-57). Meanwhile, the voluntary sector has seen no movement in net employment intentions for the fourth quarter of 2011, remaining at +7.
 
Employers also seem to be hedging their bets on all employment-related decisions in response to the current economic uncertainty: hiring intentions and redundancy intentions have fallen across all sectors compared with recent previous reports. The proportion of firms intending to hire migrant workers, which has risen steadily in recent consecutive quarters, has also fallen to 19% from 25% during the past three months. Meanwhile, the proportion of firms planning to offshore jobs to other parts of the world has also decreased to 6% from 10% in the past year. India remains the most popular destination for off-shoring, with half of employers surveyed planning to locate some or all of their operations in India. The functions most likely to be off-shored are finance and accounts and IT support.
 
Gerwyn Davies, Public Policy Adviser at the CIPD, commented "the figures point to a slow, painful contraction in the jobs market. Many firms appear to be locked in 'wait and see' mode, with some companies scaling back on all employment decisions against a backdrop of increasing uncertainty as a result of the Eurozone crisis and wider global economic turmoil."

"The good news resulting from this lull in business activity is that fewer employers are looking to relocate abroad or make redundancies. The downside is that recruitment intentions are falling, which will make further rises in unemployment therefore seem inevitable given that public sector job losses are outpacing the predictions made by the Office for Budget Responsibility. There is no immediate sign of UK labour market conditions improving in the short or medium term."

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