Jobs warning as unemployment figures released

Before the latest unemployment figures are published today the report by accountancy giant PwC said the output of private firms could be slashed by around 46 billion a year by 2014/15 due to the impact on firms supplying the public sector.

Combined with forecasts about the number of jobs in public sector organisations under threat, almost a million workers could face unemployment, the report warned.

PwC chief economist John Hawksworth said: "Predicted levels of public and private sector job losses will be a drag on the pace of the economic recovery, but should not derail it altogether.

"While private sector employment may be affected as much as the public sector, this could be mitigated by increased labour market flexibility on wages and hours worked, as we saw in the 2008-9 recession.

"Although the recovery may not be as strong this time as in the 1990s, we would expect at least some rise in private sector employment over the next five years despite the fiscal squeeze, bearing in mind that this squeeze should allow interest rates to remain lower for longer."

The business services sector faced the largest impact, with a potential loss of about 180,000 jobs due to reduced public sector demand in current areas of operation, said the report.

Construction firms could lose around 100,000 jobs, PwC warned.

The total number of job losses arising from the public sector spending cuts, including knock-on effects on the private sector, might amount to around 3.4% of total employment - around 943,000 jobs, the study found.

Northern Ireland might lose around 5.2% of jobs, compared with 3.1% in London and the South East, it was reported.

Dave Prentis, general secretary of Unison, said: "This report bears out all we have been warning over the past few months. Public spending cuts will damage the economy and will drag the country into a downward spiral.

"How can throwing nearly one million people on the dole help get this country out of the red? Each job loss is an individual tragedy, and such huge numbers will become a chronic drain on the remaining taxpayers who will pick up the benefits bill. We will end up with desolate towns, particularly in the North, with a lost generation unable to find work.

"The Government must rethink its ideological obsession with cutting public spending fast and deep. There is an alternative that includes targeting the bankers who caused the recession, and the tax dodgers, rather than ordinary working people."

And Paul Kenny, general secretary of the GMB union, said the predicted job losses were "hardly believable", adding: "PwC are predicting a tsunami wave of job losses.

"I never thought I would live to see the day when a sober analysis of economic policy would conclude that the UK Government, as a deliberate act of policy, would put one million people out of work."

A Treasury spokesman said: "The Chancellor has set out a decisive plan to reduce the UK's unprecedented deficit and restore confidence in the UK economy.

"Not taking action to tackle this problem would put the economic recovery at risk - a view shared by the IMF, World Bank, G20, Bank of England and the OECD.

"The independent Office of Budget Responsibility has set out its forecast showing sustained economic growth in the years ahead, with employment rising and unemployment falling.

"The Government is committed to supporting private sector growth and that is why the Budget announced a cut in corporation tax, a NICs tax holiday for new small businesses and a regional growth fund."

A report from the Recruitment and Employment Confederation (Rec) published yesterday said the outlook for jobs remains "mixed", with a growing number of public sector employers expecting Government spending cuts to affect their business.

The Rec said the "levelling out" of jobs is a cause for concern, especially when private firms will increasingly be called on to absorb expected job losses in the public sector.

The report showed most firms plan to maintain or increase the number of agency staff in the next three months.

Roger Tweedy, the Rec's director of research, said: "Employers are remaining cautious against the backdrop of an uncertain economy and a volatile jobs market.

"However, there are some positive messages with the most obvious sign of movement being a renewed positivity towards using agency workers as a means of bringing extra resources and flexibility into their operations.

"This demonstrates the important role of flexible working models as a vital resourcing option for UK businesses as well as a way back into the labour market for jobseekers."

The Government will study the unemployment figures from the Office for National Statistics for the latest trends on unemployment, just a week before the Comprehensive Spending Review is published.

Unemployment fell by 8,000 in the three months to July to 2.47 million, while the number of people claiming jobseeker's allowance in August increased by 2,300 to 1.47 million, the first rise since January.