When Will UK Unemployment Hit 3 Million?

Posted on: 07.05.2012    11:27:07

As an recruitment company we are a barometer on what is happening around the globe.

Today’s piece is about the UK. We are proud of our origins in the West Country but saw the recession coming and turned to international recruitment markets in 2008 as we saw troubles ahead and frankly, we have cherry picked areas with international skills shortages whilst maintaining our presence in the UK, but shifted away from high volume, low cost provision of teams to more bespoke solutions.  We are therefore able to comment on the UK market with some objectivity as we speak to real employers.

Mixed signals continue to emerge as the UK moves sideways as a two speed economy with the greatest challenge being enterprises sat on their hands not knowing what to do!  This uncertainty is based on a lack of faith in the banks and the politicians and the need to keep substantial funds available for self-survival.

In a study by the Centre for Economics and Business Research (CEBR) think tank, the regions expected to be worst affected by rising unemployment will be those most dependent on public sector jobs, such as the North East and South West.

Northern Ireland, Wales and Scotland also face five more years of pain as weak private sector job creation and public sector cutbacks push up the jobless toll, the grim analysis said. This is a correction the bloated state involvement of the Brown era creating upwards of 1 million unnecessary jobs and the consequent rise in the States percentage of consumption without adding value.

Realignment as inevitable but the timing and time span of the impact remains largely unknown.

The think tank revised upwards its unemployment rate forecast, expecting it to average 8.7% this year – up from its current rate of 8.3% – and to rise to 9.2% in 2014, remaining flat for the next two years. As we have said for over two years, we will see 3 million unemployed before we see unemployment dropping below 2 million, unless political manipulation of the already manipulated statistics increases to artificially depress the numbers!  We need to look at the burden of the economically inactive, not just the headline unemployment figures. It remains a game of smoke and mirrors with statistics.

Rob Harbron, a co-author of the report and economist at CEBR, said: “Five more years of pain are expected for much of the UK, with unemployment continuing to rise in almost every region. “The outlook is tough for UK households, particularly those in places with a high dependency on public sector employment. Family budgets are being squeezed between the pressures of rising unemployment, low earnings growth and stubbornly high inflation”.

All true, but a function of mortgaging the family silver at governmental and personal levels. Eventually we have to pay the bills and now is the time of reckoning.

The report said the regions most affected would go through a “period of transition” which could help foster private enterprise and job creation in the long run, as public sector support is withdrawn. But most regions face hardship until 2016, the CEBR said.The report does not explain how in any detail!

The North East has the greatest public sector dependency of any English region, with unemployment already higher than anywhere else in the UK. The CEBR expects joblessness to rise further, from 12% this year to 13% in 2016, only marginally above levels seen in the early nineties recession.

Weak output growth in the North West would likely hold back job creation, while workers in Yorkshire and the Humber were particularly exposed to public sector cuts, the CEBR said. The West Midlands is also forecast to see an increase in joblessness to 10.4% by 2016, up from 9.8% currently.

The gloomy forecasts for most UK regions are in stark contrast to the South East, East and London, where the labour markets are expected to remain relatively buoyant over the coming years, the report said.

In the West Country, Devon is particularly effected by public sector cut backs in both Exeter and Plymouth, but the main problem lies with a lack of confidence with businesses being sat on cash and unwilling to invest as having gained independence from banks they prefer to operate at a lower independent level contraining growth and hence employment and who can blame them?

The South East has the lowest dependency on public sector jobs and is shielded from the worst of austerity cuts, helping to drive its forecast unemployment rate down from 6.3% this year to 5.6% in 2016, the lowest of any region.

Elsewhere, three in 10 workers employed in Northern Ireland are in the public sector, where public sector cuts could push unemployment from 8.8% this year to 10.7% by 2016 – a 17-year high – the analysis said.

The conundrum continues as there are approaching 500,000 unfilled jobs in the UK with Job Centre Plus taking 10,000 vacancies a day, according to third party reports, but there remain skills shortages throughout the UK especially in trade related areas like Welders, Fabricators, Millers, Turners, Bench Joiners and the like so Eastern Europeans are still coming in to fill the void.

It sounds crazy but if you are running a UK business and need people and can’t find local skilled workers you have no choice but to consider the world famous Polish Worker.

Where we need to look is at the local winners in the regions – what are they doing to buck the trend? What lessons can be learnt and how can we help them thrive so that communities can enjoy the ripple effect and hopefully learn along the way.

Politicians, the Banks, Educators will only play a small part in getting UKPLC out of this mess. It will be businesses finding new products or markets at home and abroad that will help but this will not deliver full employment.

We now have long term structural unemployment for the foreseeable future as does much of the rest of the world.

 

Author: Chris Slay

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