Unemployment Outlook is Grim

Posted on: 15.11.2011    08:19:45

Against fears of a further slowdown, 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 Chartered Institute of Personnel and Development’s (CIPD) autumn Labour Market Outlook report, following a survey of more than 1,000 employers.

The report predicts that 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 12-month index also recording -2. This reinforces our belief that we will soon be seeing unemployment topping 3 million and youth unemployment exceeding 1 million.

The private sector does look 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.

Another report from the CBI, also published recently, found that the tentative private sector jobs recovery is continuing, but that serious risks to the employment outlook remains.

It found that in the private sector, 47% of employers are predicting their workforces will be larger in a year and 19% predict they will be smaller, giving a balance of +28%. This rises to +35% in firms with fewer than 250 employees Only 7% of firms are operating a recruitment freeze, compared with 61% during the depths of the recession in 2009. This is encouraging but reflective of management sitting on their hands nervously at present.

There are still skills shortages in the UK and it is in these areas that you are still seeing Polish and other Eastern European workers being recruited in areas such as welding, CNC operatives as well as the more traditional areas of warehousing and the care sector. Large scale contract hire of Polish workers is off the agenda at present as confidence is missing. 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.

Indeed according to the CIPD report, employers also seem to be hedging their bets on all employment-related decisions in response to the current economic uncertainty. Recruitment intentions and redundancy intentions have fallen across all sectors compared with recent previous reports.

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 offshored are finance and accounts and IT support.

Of course we are also seeing employers from other countries cherry picking the people that the UK can least afford to lose with Australia in particular chasing individuals to help close skills shortages. Matters will not be helped by the announcement of Armed Forces redundancies but we believe that employers will find having access to such workers to be attractive.

It is a grim festive season ahead and we fear an even tougher 2012.


Author – Chris Slay

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