Jobless at highest level under Labour

Hundreds of thousands more people will lose their jobs this year, business leaders have warned, as unemployment closed in on two million, the highest level since the Labour government was elected in 1997.

The total number of unemployed in the UK rose by 131,000 to 1.92 million over the three months to the end of November, the Office for National Statistics said yesterday, taking Britain's joblessness rate to 6.1 per cent.

The figure seems certain to have gone above two million by the end of last year, with the ONS saying that 77,900 new claims for jobseeker's allowance were made in December, taking that measure of unemployment to 1.16 million.

John Philpott, chief economist of the Chartered Institute of Personnel and Development (CIPD), warned unemployment would rise much more quickly during 2009. "The worst of this jobs crisis is yet to come," Mr Philpott said. "We are entering the dark days and should be prepared for a depressing period when, as in the 1980s and 1990s recessions, the benefit claimant count will rise by more than 100,000 each month. Even on the most optimistic of scenarios, about one in 10 people will be unemployed by the time the jobs recovery begins."

Most independent economists believe that unemployment is likely to top three million before the end of the downturn. The ONS is, on Friday, due to unveil Britain's economic growth figures for the fourth quarter of last year. A negative figure for GDP, now a certainty, would signal that the UK has officially moved into recession.

Unlike previous downturns, this recession is being experienced throughout the UK, with almost every region of the country now seeing sharp increases in unemployment.

However, the official statistics suggest that younger workers are suffering disproportionately in the downturn, with more than 614,000 people aged between 18 and 24 losing their jobs over the year to the end of November. There is also some evidence, the Trades Union Congress said yesterday, that more women than men are being laid off by companies making redundancies.

Business groups warned there would be no let-up in the increases in unemployment until businesses of all sizes began to find it easier to get credit from their banks.

"Businesses are being increasingly forced against their will to let good staff go," said David Frost, director general of the British Chambers of Commerce. "Unless banks start behaving more responsibly by unblocking credit markets, cashflow will continue to be a major issue for UK firms. After this week's second bailout, the Government must get banks lending again if the tide of rising unemployment is to be pushed back."

There was certainly no sign of any respite yesterday, with hundreds of new job losses announced by companies around the country.

Sainsbury's, the supermarket giant, is to shed more than 200 posts from its London head office, while a further 200 jobs will go at Hammonds Support Systems, a Bradford-based firm. Trades unions are also concerned that some of the 5,000 job cuts announced by the Swedish mobile phone company Ericsson will fall in the UK.

The ONS also warned that people losing their jobs are now less likely to find employment elsewhere. There were 530,000 job vacancies in the three months to the end of last year, 69,000 fewer than in the previous quarter.

The Bank of England added to the gloom, with its survey of regional agents warning that the "broad picture remained one of shrinking demand for labour".

Howard Archer, chief UK and European economist at Global Insight, said: "The bad news on the labour market is absolutely relentless now."