Rise in private sector redundancy intentions contributes to worst employment prospects since the recession
The first quarter of 2012 will be the most difficult quarter for the jobs market since the recession, as the number of private sector firms surveyed planning to make redundancies increases. This is the main finding of the latest Chartered Institute of Personnel and Development (CIPD) quarterly Labour Market Outlook survey of more than 1,000 employers, conducted by YouGov. The survey results also point to a further widening of a north-south jobs market divide.
The survey’s findings are consistent with the consensus of economic forecasts, and reinforce the CIPD’s prediction that unemployment could reach 2.85 million by end of 2012 if business conditions do not improve. The report’s net employment balance, which measures the difference between the proportion of LMO employers that intend to increase total staffing levels and those that intend to decrease total staffing levels in the first quarter of 2012, has fallen to -8 from -3 since the autumn 2011 quarter. This is the report’s worst figure since spring 2009. The survey’s twelve-month balance, which gives a longer-term perspective on the net effect of recruitment and redundancy intentions, has also fallen to -6 from -2.
The Labour Market Outlook Winter 2011-2012 report shows that worsening overall employment prospects are almost entirely accounted for by a drop in confidence in the private sector during the past three months. Although net private sector employment intentions remain in positive territory, they have fallen from +20 to a much more subdued +10 in the past three months – further undermining hopes that private sector recruitment will compensate for reductions in public sector employment. The net employment balance in the public sector, unsurprisingly, remains at a solidly negative -49.
Breaking down private sector recruitment intentions further, the current report suggests employment growth in manufacturing is set to stall (net employment intentions down to just +1, from +14 three months ago). The rest of the overall fall in private sector recruitment is accounted for by a dip in the net employment intentions of firms in the services sector (down to +11 for the current quarter from +18 in the last quarter). The decline in net employment is due more to an increased number of planned redundancies than it is to lower recruitment intentions. The overall proportion of private sector LMO employers planning to make redundancies is at its highest level since spring 2009 and, within this overall private sector figure, nearly a third (31%) of private sector services firms intend to make redundancies this quarter, up from 24% in last quarter’s report.
The results also suggest a further widening of the north-south divide in job prospects. The net employment balance for the south of England has improved modestly to -1 from -4 in the past three months. London is the only region in the UK to register a positive score (+3). In contrast, employment prospects in the north have fallen to -20 from -17 over the same period. This follows the most recent official Labour Force Survey1 unemployment statistics which showed that the north east of England (+2.3%) and the north west of England (+1.2%) saw the largest unemployment increases in the 12 months to November 2011.
In reviewing the past two years, almost half (47%) of employers feel that they have been prevented from creating new roles over and above existing levels. Among those employers who feel they have encountered barriers to hiring, the main barriers highlighted are access to finance (54%) and skill shortages (21%).
Gerwyn Davies, Public Policy Adviser at the CIPD, said:
“Whereas employers were in ‘wait and see’ mode three months ago, more private sector firms, particularly among private sector services firms, have decided to push the redundancy button in response to worsening economic news. This will exert yet more pressure on a jobs market that is buckling under the strains of contractions in economic growth and public sector employment. The fear is that these existing pressures, which include a widening chasm between the employment prospects of those in the north and the south, will become greater still if business conditions do not improve in the next few months. With many employers telling us that access to finance has been a big factor in preventing them from creating new jobs over the last two years, and with net private sector hiring intentions now on the slide, the labour market case for government action to increase the availability of credit to businesses is stronger than ever.”
The prospect of more redundancies in so many firms also poses significant management challenges which businesses need to address urgently.
Davies continues: “With redundancies looking set to be a feature in growing numbers of firms in the months to come, business leaders need to focus attention on communicating and consulting with staff to build trust and employee engagement in these uncertain times. Employees are likely to respond more positively to change, and even to the threat of redundancies, if they feel that they have a voice in the workplace and that senior leaders listen to their views before taking decisions.”
Other key findings:
• Organisations that are planning to make redundancies expect 4% of their workforce on average to be made redundant.
• Six out of ten LMO employers are not planning to create any new roles in the next three months. Where recruitment is expected, demand is heavily concentrated among management/executives (23%) and sales and marketing (21%). Other roles include business development (16%) secretaries and PAs and office support (15%), IT staff (15%), accountancy/finance staff (15%) and engineers (13%).
• Looking ahead to the next five years, LMO employers anticipate an increase in demand for roles in business and development (28%), sales and marketing (24%) and IT staff (20%).
• Business support functions have borne the brunt among those employers that say they have been prevented from creating new roles during the past two years. More than a third (36%) report that they have been prevented from creating PA or secretarial roles; followed by HR (30%), management/executives (26%) and IT (23%).
1Statistical Bulletin, Office for National Statistics (January 2012).