Job cuts likely as credit crunch tightens

More than half of UK employers will cut jobs over the next few months as they deal with the fall-out from the credit crunch, a report has revealed.

The quarterly National Business Survey by professional services firm KPMG found 53% of senior executives in both the public and private sectors plan to reduce their headcount, with 52% expecting to freeze recruitment.

In March, just 29% of respondents said they were looking to cut jobs as a cost-saving measure, but Malcolm Edge, regional chairman for KPMG, believes employers are now bearing the brunt of the damage caused by the economic squeeze.

“The clouds that were on the horizon when we first conducted this survey back in early spring are now right over head, with businesses feeling the impact of this so-called ‘perfect storm’ of rising inflation, tightening credit conditions and plummeting consumer confidence,” said Edge.

“With six out of 10 businesses looking to cut costs, staff redundancies may seem like the obvious, albeit painful, solution. The widespread redundancy programmes we have already seen in the financial services and house-building sectors may therefore just be a small sign of things to come.”

A quarter of those polled don’t believe their organisation has been damaged by the suffering economy, while the number who are optimistic about their company’s prospects over the next 12 months has fallen from 60% of respondents in March to 40% in July.

“Eighty percent of the organisations who took part in our survey were based outside London, signifying that the credit crunch may finally have hit home across the UK regions,” Edge said.

“There were certainly arguments in some quarters at the beginning of the year that it was primarily the City of London that had been caught and that the rest of the British economy may escape relatively unscathed.”

“However, there’s now no denying that we’re all in this together, possibly for the long haul.”

Rising inflation is still the greatest concern for most employers, with three-quarters of respondents believing it will spark increases in costs, 70% believing it will affect profit margins and a further two-thirds expecting it to prompt higher wage demands.

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