British Job Market Faces Painful Contraction, Says Study

As the turmoil in the eurozone continues unabated, the British job market is due to suffer a "slow, painful contraction" in the coming months as firms are in no mood to hire new staff, a new study has warned.

The Chartered Institute of Personnel and Development, in its final quarterly report of 2011, predicted that the employment scene would worsen amid global financial and economic turbulence. The survey of 1,000 employers found that the public sector losses were likely to shadow the hiring plans of the companies. The situation will only worsen next year, the study warned.

"The figures point to a slow, painful contraction in the jobs market," Gerwyn Davies, public policy adviser at the CIPD, told The Wall Street Journal.

"Many firms appear to be locked in 'wait and see' mode, with some companies scaling back on all employment decisions against a backdrop of increasing uncertainty as a result of the eurozone crisis and wider global economic turmoil," said Davies.

With no immediate sign of relief in the short-term or medium-term labour market, the survey showed that UK firms have no immediate plans to recruit and invest in domestic staff. Firms don't have plans to relocate to overseas locations either, the report said.

"The good news resulting from this lull in business activity is that fewer employers are looking to relocate abroad or make redundancies," Davies told the BBC.

"The downside is that recruitment intentions are falling, which will make further rises in unemployment therefore seem inevitable given that public sector job losses are outpacing the predictions made by the Office for Budget Responsibility. There is no immediate sign of UK labour market conditions improving in the short or medium term," he added.

As the Office for National Statistics prepares to release the latest unemployment figures in the next two days, the numbers for unemployed youth between 16 and 24 are expected to cross the 1 million mark.

A TUC report, released last week, said the unemployment figures had risen to 97 percent in local council areas, with an increase in 196 of 202 local authorities, since September 2010.

In its report from last month, the CIPD reported that the public sector had been "shedding" jobs at five times the rate previously predicted by the Office for Budget Responsibility. An OBR forecast revealed that only through the private sector job creation could a sustainable job scene be established, as it would surpass the public sector cuts by 2015.