Companies shun spending as fears grow of 3m jobless

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The Independent Online

Businesses are braced for a bleak second half of the year, with finance chiefs prepared to sit on billions of pounds their companies have stockpiled as confidence plummets, while a sharp fall in the number of staff placements fuels fears that the unemployment rate could hit three million in UK again.

The latest monthly report on jobs from KPMG Rec shows wages stagnating as both permanent and temporary appointments fell last month at the fastest rate since July 2009.

"After five months of consecutive growth, the latest data comes as a sobering reminder that we're far away from a confident economic situation," Bernard Brown at KPMG said.

"If this trend were to continue, there's a very real chance we could hit a three million unemployed figure in the UK in the not-too-distant future."

Meanwhile, Deloitte's second-quarter finance survey, which questioned 137 finance directors, including 39 from the FTSE 100 and 57 from FTSE 250 companies, shows the sharpest decline in corporate confidence since it was started in 2007. It marks a reverse on the first quarter which showed confidence rebounding.

Deloitte's survey, one of the most authoritative polls of executives with their hands on company purse-strings, shows that their mounting fears over the economy means they have adopted defensive strategies including avoiding any risk – four-in-five say now is not a good time to take risk onto company balance sheets.

This is despite an apparent ready access to finance, with just four per cent citing the cost or availability of credit as having influenced changes to their investment plans. The cost of borrowing, they told Deloitte, is lower than at any time in the past five years.

By contrast, 82 per cent said that expected demand for their goods and services together with uncertainty about the economic environment were having far more influence on recent capital-spending decisions.

That bodes ill for those hoping that companies will start to spend cash on investing in their businesses to stimulate the economy.

More than a quarter of the finance directors surveyed are actively preparing for the exit of at least country from the euro by the end of the year. They rate the chance of it happening at 36 per cent.