Fears grow for a generation without a job

John Cridland warned that unemployment could increase in Yorkshire as more small firms struggle to survive, despite modest signs of economic growth.

During a fact-finding tour of Yorkshire, Mr Cridland said the UK had entered a period of uncertainty as business leaders waited for the outcome of the General Election, which is expected to be held in May.

He told the Yorkshire Post: "There's a lot of really big investment decisions hanging fire because maybe the ultimate decision makers, even if it's investment in Yorkshire, might be on the west coast of the US or in India or China. They want to know whether there's going to be a strong Government in this country.

"A hung parliament is a challenge, because the one thing business doesn't want is decisions put off for a year. I'm old enough to remember what happened in 1974. We had two elections in one year. It doesn't have to be like that.

"Continental countries cope with hung parliaments and they have coalition governments and those can be very strong governments."

Mr Cridland said that businesses he had met in Yorkshire were "beginning to see light at the end of the tunnel".

But he cautioned: "People think growth is going to be slow. It's going to be two steps forward and one step back."

Although the latest jobless figures had been better then expected, Mr Cridland was concerned about the growing numbers of young people who are classified as economically inactive.

Unemployment stood at 2.45m for the three months to January, down 33,000 on the figure for the previous quarter. He added: "We know that the scarring effects of youth unemployment can mess up lives for a generation to come and, while overall unemployment is nowhere near as bad as we feared, youth unemployment is seriously high.

"We do end up with a depressing situation where business says it can't source from its local community. It reaches out to recruit people from its home market and has ended up bringing in people in the last few years from Poland and further afield because it can't find the people it needs."

He said the migratory pattern had shifted, with more employers recruiting Estonians because the Baltic republics have struggled during the recession.

As a result, more Estonians were seeking employment overseas.

Mr Cridland added: "What I have found in Yorkshire reflects the pattern across the country. This was a recession led by problems in financial services, so until financial services and the financing of the property market are sorted there's going to be a sluggishness about recovery.

"Businesses don't have money for investment. That's why I fear, even here in Yorkshire, that unemployment will go up a bit further. Small businesses that have survived through the recession will fall over precisely at the point where they need working capital for expansion.

"We saw businesses tighten their belts and slim down during the worst of the recession...What we saw was a massive amount of living off fat. They are most vulnerable at the point where business picks up."

He said banks were having difficulty with credit because governments are requiring them to build up their capital.

He added: "I've got more than 500 companies in the CBI whose primary business proposition is to sell into the public sector. Clearly, some of them are worried about a drying up of business, particularly here in Yorkshire.

When asked about the timing of public spending cuts, he said: "The CBI has established a very clear third way between the two parties. We think that neither of them have quite got it right."

He acknowledged that cuts in public spending were needed to ensure global investors had confidence in the UK. But the CBI doesn't support spending cuts this year.

'One of the best RDAs'

CBI Deputy Director General John Cridland said that many businesses in Yorkshire believed that regional development agency Yorkshire Forward had done a good job.

He added: "If you looked at the country as a whole, business would say, 'RDAs are a good concept, but haven't always delivered what business is looking for.'

"It's sort of an amber light. Then you get a pattern across the country that reflects the strength and success of the RDA. I would say Yorkshire Forward is one of the best RDAs. Businesses in Yorkshire are more supportive of this RDA, than would be the case, for example, where I live in southern England."