One in four small and medium-sized firms cutting jobs

Almost twice the number of small and medium-sized employers (SMEs) have cut jobs than expanded their workforce in the last three months.

The CBI’s latest SME Trends survey found 17% of SMEs had added positions but 29% had reduced the employee numbers, the worst differential in five years.

More than one-quarter claim they will reduce their headcounts further in the coming months.

Russel Griggs, chairman of the CBI’s SME council, said: “After more than a year of steady growth on the jobs front, we are now starting to see SMEs reducing their headcount in response to weakening demand in the face of global economic slowdown.”

“It is worrying that more SMEs are finding a lack of credit affecting business decisions. But the bold rate cuts of recent weeks and measures to support SMEs should help prevent a further credit squeeze, although the impact is unlikely to be immediate.”

A spokesman from the manufacturer’s union EEF said: “Things are not yet falling off a cliff but we are now seeing longer lay offs in the run-up to Christmas than we have seen for years.”

“This is not just based on deteriorating market conditions but also about difficulty in key trading areas – in particular the EU and the US.

SMEs see no let-up in the coming quarter with total orders, domestic orders and export orders all expected to fall further.

Meanwhile, UK business leaders and employer groups have warned president-elect Barack Obama to steer clear of protectionist policies that will reduce trade between the US and UK when he takes office in January.