UK jobs market suffers as business confidence falls

Gloomy double bill of research gives UK plc little cause for optimism

The UK jobs market is set to feel the pinch in 2011's third quarter, and long-term prospects are even bleaker as key private sector industries struggle to post any growth.

The Labour Market Outlook report from KPMG and the Chartered Institute of Personnel and Development (CIPD) recently quizzed 1,000 employers about whether they planned to increase or decrease staffing levels in Q3. Firms planning to axe jobs now outnumber those planning to boost headcount.

The Outlook index for Q3 stands at -1, down from +3 in the preceding quarter. The longer-term situation appears even more bleak, with the 12-month index figure standing at -6, compared with +2 in 2011's second quarter.

The quarterly private sector index for Q3 is +23, down nine points sequentially, while the public sector index is more or less flat at -51. Hiring prospects in the manufacturing sector have been among the worst hit, with the Outlook index falling from +32 in Q2 to +11 in Q3.

There is also a widening discrepancy between prospects in the north and south of England. In the south of the country, the quarterly index for all sectors is +10. The figure for the north is -6.

Gerwyn Davies, CIPD's public policy adviser, claimed the softness of the manufacturing space will be of particular concern for the government as it tries to kick-start the economy with private sector growth and export revenue.

"Together with the public sector redundancies, which will affect one in 20 front-line workers according to our survey, the recent story of an employment revival may become one of an employment relapse," he said. "The survey evidence suggests that the relapse will hit some regions much harder than others, which points to the further development of a two-speed economy."

More gloomy news for the UK economy comes in the shape of auditor BDO's monthly Business Trends survey, which also points to pain ahead for the manufacturing space. The manufacturing output index for July stands at 93.9, well below the 95 threshold which denotes market shrinkage. The manufacturing optimism index is also some way below 95.

The prospects for the services sector are scarcely sunnier: the optimism and output indexes stand at 95.5 and 95.3, respectively. These figures suggest the market will post no growth over the rest of the year.

BDO partner Peter Hemington said: "The UK's economic recovery continues to falter. The rapid decline of the manufacturing sector, championed as the key to a rebalancing of the UK economy, is alarming. And the services sector is showing little sign of picking up the slack."