Small firms won’t fill jobs gap created by public sector cuts, warns FSB

Fresh doubts have been raised about the ability of the private sector to fill the jobs gap created by public sector cuts, with research revealing that more than one in 10 small firms are planning to cut jobs in the next three months.

In the survey of more than 1,300 small companies by the Federation of Small Businesses (FSB), 10.4% said that they expect to decrease employment over the next three months as business confidence in future prospects and revenue growth weakened.

The net balance of businesses expecting an improvement in prospects over the next three months has seen a steady decline since the start of the year, from 16.2 % at the end of the first quarter, to 4.2 % in the second quarter and just 0.5% at the end of the third, the latest “Voice of Small Business” index shows.

More than one-third (38.1%) of respondents also reported a decline in revenues in the three months to September, suggesting that economic recovery is far from robust.

The Office for Budget Responsibility (OBR) believes that there will be a net gain in employment of 1.3 million between 2010 and 2015, driven by the private sector.

But John Walker, FSB national chairman said: “The Government is looking to the private sector to create jobs and take on the people that will be made redundant as a result of the cuts. Evidence from this report shows that small firms do not have the confidence to do that yet and so we urge the Government to ensure that the right measures for firms to grow are laid out.”

John Philpott, chief economic adviser to the Chartered Institute of Personnel and Development, has said that up to 2.5 million jobs will have to be created if the OBR’s forecast is to be met.

He believes that this is extremely unlikely – with total employment in 2015-16, “around 100,000 higher than in 2010, but far less than the 1.3 million extra jobs the coalition Government is hoping for”.

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