The latest quarterly CIPD/KPMG survey of employers’ recruitment and redundancy plans indicates that UK job prospects are deteriorating ‘at an alarming rate’, while the scope of average pay rises is shrinking.
The winter Labour Market Outlook survey of 892 UK employers, conducted by Ipsos Mori at the turn of the year, finds that more than one in three (36%) plan to cut jobs in the first quarter of 2009 – double the proportion expecting to make job cuts at the time of the previous survey carried out last autumn.
The latest Labour Market Outlook records a negative balance of -9 percentage points between the proportion of employers planning to cut jobs and the proportion looking to hire additional staff (27%). This is the first such negative balance recorded in the five years since the Labour Market Outlook survey began in 2004.
Tighter rein on pay increases
The current survey also finds that employers intend to keep a much tighter rein on pay increases in the coming months. Those who plan pay reviews expect staff remuneration to increase (on average) by 2.6%, much lower than the 3.5% average increase expected last autumn. But as many as one in eight employers don’t intend to conduct a pay review at all in 2009.
John Philpott – chief economist at the Chartered Institute of Personnel and Development (CIPD) – has appraised the survey findings. Philpott told SMT Online: “These latest figures suggest that job prospects are deteriorating at an alarming rate. The labour market outlook is clearly even worse than expected at the turn of the year.”
Philpott continued: “Official statistics to be issued later this week will confirm that unemployment passed the two million mark at the end of 2008. It now seems sadly inevitable that UK unemployment will top three million before the jobs market finally starts to recover.”
Philpott’s employer has over 130,000 members, and is the leading professional institute for those involved in the management and development of people.
Speed of deterioration is ‘breathtaking’
Andrew Smith, the chief economist at KPMG, added: “The speed of deterioration in the labour market is breathtaking. Higher unemployment will weaken demand which, in turn, will lead to higher unemployment. With interest rate policy now running out of room, this latest survey underlines the urgent need for alternative monetary policy measures – so-called quantitative easing – to ameliorate the risk of a downward spiral becoming entrenched, and turning what already looks like a grim recession into something even worse.”
For its part, KPMG is a global network of professional firms providing audit, tax and advisory services. It presently operates in 144 countries, and employs over 100,000 professionals working in member firms around the world.
The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss co-operative.
What about the interest rate cut?
Responding to last week’s 0.5% cut in the official Bank of England base rate of interest, Philpott said: “The Monetary Policy Committee is right to cut the base rate to 1%, even though some question the merit of doing so without greater effort to increase the availability of credit for hard-pressed businesses. Either way, however, with conditions in the job market deteriorating rapidly, what’s needed now to stem the rise in unemployment is early action that will actively boost the supply of money to our cash-strapped economy.”