The "dire" state of the economy and, in particular, the rapidly deteriorating outlook for jobs was confirmed in a range of economic surveys released yesterday, casting further doubt on the Government's predictions in the pre-Budget report that the UK economy will bounce back strongly from next summer.
The Chartered Institute of Purchasing and Supply (CIPS) has been reporting the difficulties faced by the construction industry for some months, and the pain it is going through has been well documented. However, CIPS said the position of many companies has now become even more precarious, with further job losses more or less certain. The accelerating contraction in the building industry during November, now spreading from house builders to civil engineers, has pushed the CIPS confidence barometer to a record low of 31.8 (any reading below 50 indicates a contraction, and the poll has been run since 1997).
The CIPS reported a steep fall in new orders and said that firms had "streamlined workforces at an unprecedented rate". Matthew Sharratt, UK economist at Bank of America, said: "Today's slump followed another dire reading for the manufacturing sector yesterday. Leading indicators tell a story of a capitulation in demand, rapidly falling employment and growing disinflation. With the services business confidence indicators today likely to reveal further pain in the most important area of the economy, we now expect a 2 per cent decline in GDP next year."
One of the few glimmers of hope in the figures was the steep decline in input costs. Yesterday oil traded below $48 a barrel, against a peak of almost three times that seen in July.
The latest Report on Jobs from KPMG/Recruitment and Employment Confederation suggested a similar pattern in the wider economy. Average salaries for new starters and temps fell for the second month running in November, confirming that even the recent burst of high inflation has failed to spur wages much. Only the nursing and medical care sectors showed any increase in demand for labour. Otherwise there were "steep" reductions in permanent placements and in temp billings.
Mike Stevens, head of business services at KPMG, said: "This latest survey leaves no doubt that the UK jobs market is now heading downhill at breakneck speed. The drop in permanent placements is far steeper and deeper than at any time in the survey's history."
Reports of actual job losses and fear of unemployment has fatally undermined consumer confidence, fuelling fears that the Chancellor's cut in VAT and any further reductions in interest rates by the Bank of England will be a case of too little, too late. The Nationwide Consumer Confidence survey reflected the other data released yesterday in showing record low readings, in this case since 2004. Fionnuala Earley, chief economist at the Nationwide, said: "Reports of job cuts have almost certainly impacted on sentiment, causing purse strings to tighten further."Reuse content