It's food, drink and 'cleantech' that will get the UK back to work

Or so hopes the Chancellor, George Osborne, as he counts on the private sector to save the country. Deirdre Hipwell reports
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The Independent Online

Within hours of the Chancellor, George Osborne, announcing some of the largest spending cuts and job losses since the Second World War, two leading forecasters said he had got his numbers wrong.

While the Chancellor stated that nearly half a million jobs would have to go by 2014-15 to create a more solvent Britain, leading economists said the figure could be at least double that, and warned that Britain must act now to counteract the fallout.

Professor John Philpott, the chief economist at the Chartered Institute of Personnel and Development, said the UK is facing job losses nearer to the 750,000 mark because the Government is not taking account of job losses going beyond 2014.

"What the review conveniently fails to mention is that the Office for Budget Responsibility's complete forecast suggests a loss of 660,000 public-sector jobs between 2010-11 and 2015-16. Unless the Chancellor decides to reverse the spending cuts pencilled in for 2015-16, he should admit this will be the outcome."

And, last week, accountancy giant PricewaterhouseCoopers added to the gloom when it said that it thought up to one million jobs could be lost in the public and private sectors, especially in those firms reliant on public-sector contracts.

The construction industry is already bracing itself to take the initial brunt of the cuts and (as reported on page 79) is likely to re-enter recession. The Construction Products Association, a trade body, said 500,000 jobs in the sector have already been lost during the recession.

But while, over the Channel, the French have taken to the streets to protest at their own austerity measures, Osborne's Comprehensive Spending Review has been met with an eerie calm in Britain. A calm that the Chancellor, who is banking on a recovering and growing private sector absorbing many job losses and lessening the impact of his bloodletting, hopes will hold.

He may have cause for optimism, as some sectors in the British economy are anticipating future employment growth, which may help pick up the slack.

Leading the way is the food and drink manufacturing sector, which employs nearly 440,000 people and invests more than £1.1bn a year on research and development – comparable to the automotive sector.

The Food and Drink Federation said that over the next seven to 10 years the industry needed to hire 137,000 new recruits. Angela Coleshill, FDF's human resources director, said of that total, 45,000 people are needed to fill higher-skills roles such as senior management and technical positions.

"The sector's population is ageing and, in the next seven to 10 years, around one-fifth will retire," she said. "Our big challenge is replicating this knowledge and people." The total number of apprenticeships in the sector had doubled in the past 12 months to 2,500, she added, but this was "still not enough".

Meanwhile, FDF's director general, Melanie Leech, said the sector's continued investment in factories and people meant the "Government can place us with confidence at the heart of its strategy for recovery".

The Government is also looking to put "clean technology" at the forefront of the recovery. Despite wide-ranging cuts, Mr Osborne pledged £1bn to fund a green investment bank, another £1bn towards one of the world's first power stations that stores carbon emissions, and a further £200m to upgrade Britain's ports.

Lee Hopley, the chief economist at the manufacturers' organisation EEF, said there was definite growth in the sector, but warned the focus was often more on innovation investment rather than significant employment growth.

"Across the board, we are only seeing tentative signs of companies looking to recruit again," she said. "But there is significant ramping up of activity in some sectors, such as cleantech. Having the right training and infrastructure to make sure people move from one sector to another will be vital. There will also be a large degree of transferability for many public-sector workers with project management and leadership skills."

Dr Graham Cooley, the chief executive of ITM Power, which is creating hydrogen fuel-cell technologies, said it would grow its employee base, currently at 50 people, by 20 per cent a year from next year once its products attain CE (clean energy) certification. "For all the funding cuts," he said, "the Government has really looked after the clean-technology sector and protected it."

The University of Cambridge's Institute for Manufacturing's education and consultancy services organisation, which helps more than 500 small companies, said such small- and medium-sized manufacturing (SMM) firms are key to the UK's economic revival. This sector is one of the fastest routes to recovery, creating jobs and boosting indirect employment among supporting industries, such as design, marketing and R&D.

IfM, in its report, Enabling Economic Growth: effective support for smaller manufacturing businesses, published last week, said the Government must focus on targeted support to firms with the best prospects.

Dr Alan Cousens, the report's author, said there were around 32,000 SMMs, employing between 10 and 250 people, in the UK, but only around 8,000 of these were in a "sustained growth" phase and could greatly benefit from increased support.

Support for this sector was critical, he said, as the latest figures from the Department for Business, Innovation and Skills showed that since 2008 the number of SMMs employing more than 10 people had fallen by 5.4 per cent and their headcount by 5.9 per cent. "The impact of the recession on SMMs is clear," he said. "If we are to rebalance the economy and get economic growth, then SMMs will have a role to play. Let's start with them rather than spraying around shallow help."

Internet and telecoms is another growth area. Paul Winchester, the managing director of IT and telecoms recruiter Greythorn, estimates there will be around 6,125 IT professionals leaving the public sector every year for the next four years. "That looks bad," he said. "But if the growth in the first three quarters of this year continues, the private sector will hire a further 7,500 IT professionals in the fourth quarter of 2010 alone."

The Government is also funnelling £650m into increasing cyber security, which will also generate employment. Henry Harrison, the technical director at Detica, said: "A lot of people will assume last week's [security] review is for spooks and soldiers, but cyber security is as important in the private sector. There will now be a regulatory oversight function in the Department for Business, Innovation and Skills and this sector is heading for growth in the way the e-business was 15 years ago."

Other emerging areas, such as nanotechnology, show encouraging signs, and George Freeman, the MP for Mid Norfolk, has called for increased government support (see box, right).

The Office for National Statistics' October labour bulletin showed the decline in unemployment numbers, at 2.45 million in the quarter to August, only began in the past six months in certain sectors. Recovery is not assured. Professor Philpott said: "We are optimistic that the private sector will create additional jobs, but we don't think it will create as many as the Government is hoping for. Given the background we are starting from, it would be a decent outcome if we broke even."