The forecast for the number of new jobs next year is the worst in a decade because private firms are recruiting fewer staff and the public sector is facing severe cuts, a new report warns.
Fears are mounting that storm clouds gathering over the British economy, coupled with slowing global economic growth, could fuel a recession in Britain next year, as a decade of steady growth and low inflation threatens to come to a painful close.
The Chartered Institute of Personnel and Development (CIPD) said in its annual end-of-year report that 2008 was likely to be "easily the worst" in the jobs market since Labour came to power in 1997. Employment is expected to increase by only 0.25 per cent over the next 12 months, substantially lower than the average over the past decade. "In the early part of the decade [since Labour came to power], periods of slower growth in private sector employment were masked by relatively rapid growth in public sector jobs," said John Philpott, chief economist at CIPD.
"A downward trend in public sector employment in the past two years has in turn been more than offset by rising numbers of private sector jobs. But 2008 will be the first year for a decade when the engine of job creation will be spluttering right across the economy,", he added.
"With higher fuel costs and food prices set to raise the cost of living in the first half of the year, the squeeze on real incomes experienced by many workers in 2007 will continue to bite in 2008. With jobs also harder to come by, this could reinforce the impact of the economic slowdown, possibly necessitating bigger cuts in interest rates than currently anticipated to head off the threat of recession and a worrying prolongation into 2009".
The CIPD report also warned that firms would find handling compulsory redundancies "particularly tricky" over the next year. Bosses were advised that redundancy practice in 2008 will have to take care not to fall foul of recently introduced age discrimination legislation.
The gloomy prognosis comes amid further evidence of a cooling housing market in Britain. New figures from the British Bankers Association released yesterday suggest that mortgage lending slowed further in November, as the effects of the credit crunch begin to sink in.
The UK's main high street banks lent 4.3bn on mortgages in November, 500m less than the previous month. And though the number of mortgage approvals recovered 4 per cent to 44,811 from a record low in October, the figure was still almost 44 per cent below the level of approvals a year earlier.
Howard Archer, chief UK economist at the analysts Global Insight, said that the latest figures were "yet further evidence that housing market activity is now slowing markedly in the face of stretched affordability, as well as the tightening lending practices resulting from the credit crunch".Reuse content