UK jobs outlook worst for a decade

The outlook for the UK jobs market is the worst for a decade with unemployment and redundancies expected to rise in the wake of the international credit crisis, according to research by a leading employment organisation.

Unemployment is forecast to rise by 150,000 to 1.8m next year, the highest level since 1997 when Labour came to power, according to the Chartered Institute of Personnel and Development.

The institute’s study follows a survey of independent forecasts published by the Treasury which predicted that the number of people claiming unemployment benefit would rise by 12 per cent to 910,000 by the end of next year.

John Philpott, CIPD’s chief economist, warned that the jobs slowdown could prompt “bigger cuts in interest rates than currently anticipated to head off the threat of recession” and prolong the effects of the economic downturn into 2009.

It could also undermine the government’s flagship welfare-to-work policies designed to get more long-term unemployed into work and reduce by 1m the number of people claiming incapacity benefits.

Much would depend upon whether the flow of eastern and central European migrants coming to Britain to work would slow as the labour market weakened, Mr Philpott said.

The jobs squeeze would be greatest in the financial services sector, which in recent years has been “a substantial driver of employment growth” but is “now facing a direct hit from the credit crunch”. More public sector job losses would also make 2008 “the worst year for jobs this decade and easily the worst since the Labour government came to power,” Mr Philpott said.

Industrial relations and staff management skills would be in greater demand, according to the study. Human resources managers whose experience did not “stretch back to before the economic stability of the past decade” were facing “their first taste of seriously choppy business water”.

Mr Philpott said that, in spite of considerable organisational restructuring in the past decade, large-scale redundancies had been running at historically low levels. “This is likely to change in 2008 with more HR professionals having to deal with the particularly tricky task of handling compulsory redundancies.”

But unlike previous bouts of large-scale job shedding, redundancies would now “have to take care not to fall foul of age discrimination legislation”.