CITY FOCUS: Hard work solving the jobs puzzle as employers warn of further cuts if economy does not improve

| August 14, 2012 | 0 Comments

By
James Salmon

16:21 EST, 13 August 2012


|

16:24 EST, 13 August 2012

When a retailer blames inclement weather for a slump in profits it is best to react with a healthy dose of cynicism.

But when a recruitment firm says it is struggling because firms are axing jobs or aren’t hiring it is easier to sympathise.

White collar hiring agency Michael Page International did exactly that, with profits in the first half of the year slumping by a fifth to £36.1million.

Battered banks: Lloyds, Royal Bank of Scotland, HSBC and Barclays have cut nearly 80,000 jobs since the credit crunch

Battered banks: Lloyds, Royal Bank of Scotland, HSBC and Barclays have cut nearly 80,000 jobs since the credit crunch

The pain was particularly acute in its UK banking arm, which suffered a 50 per cent drop in fee income.

With
Lloyds, Royal Bank of Scotland, HSBC and Barclays alone slashing a
total of 80,000 jobs since the credit crunch it is hardly surprising.

Michael Page chief executive Steve Ingham warned the situation was unlikely to pick up for some time.

He added: ‘The shortfall in hiring is fairly uniform in financial services from hedge funds to banking.’

A separate study from the Chartered Institute of Personnel and Development warns of worse to come.

It
said employers are facing a ‘make or break’ moment with almost two
thirds looking to cut staff if the economy doesn’t improve next year.

This
revealed that almost a third (31 per cent) of firms are keeping on more
staff than they need during the recession to avoid losing key skills.

The
research from the CIPD addresses the ‘gravity defying labour market’
whereby the number of people employed in the private sector has
increased by almost 850,000 since March 2010, despite the dire economic
backdrop.

This was
described last week as an ‘economic puzzle’ by Charlie Bean, the deputy
governor of the Bank of England, as it slashed growth forecasts for the
year to almost zero.

Gerwyn
Davies, labour market adviser at the CIPD said: ‘This is a make or
break moment for employers – unless growth picks up many will find that
they cannot hold on to some workers any longer.’

He
added: ‘The labour market is approaching a game changing phase – one
that could shape Britain’s capacity to compete for a generation.’

The
CIPD survey of more than 1,000 employers found more than six in ten (62
per cent) are holding on to staff to retain their skills but 62 per
cent feel they would be forced to cut back if the economy doesn’t pick
up soon.

Some experts
believe this is increasingly unlikely, with Bank of England governor Sir
Mervyn King last week reiterating his warning that a recovery was still
years away. He described the ongoing eurozone crisis as a ‘black cloud
of uncertainty’ over the global economy.

This
gloom has spread to businesses according to a separate study from
accountancy firm BDO. This indicated that confidence among UK businesses
has fallen for the fifth consecutive month to the lowest level since
last year.

Its monthly ‘Optimism Index’ reflects how well company bosses think their business will perform over the next six months.

Britain
is in the grip of the longest double-dip recession in more than half a
century with the economy shrinking by 0.7 per cent between April and
June – more than three times worse than the 0.2 per cent slide feared by
City analysts.

But
it’s not all doom and gloom. Tomorrow, official figures are expected to
show unemployment has dropped by 45,000 to 2.58million. While a small
drop, it is at least a step in the right direction.

The
engineering sector has been vocal about the continuing demand for
skilled staff. Companies such as Scottish and Southern, Thales, Vestas
and E.ON have all been taking on staff, according to the Institution of
Engineering and Technology. Its latest research suggested that 58 per
cent of companies – including those in energy, aerospace, building,
construction and electrical – are planning to recruit next year. This
compares with just 36 per cent last year.

Sir
Ronald Halstead, president of the Engineering Industries Association,
said: ‘I would say most of our members are either not losing jobs or
taking on staff. One of the main problems is these firms would take on
more staff if they could get the banks to lend them money. This is
stifling the industry.

‘There is also a shortage of skilled workers in the UK, meaning firms are having to look to Poland and Eastern Europe.’

Recruitment
business Harvey Nash also bucked the gloomy news about jobs when it
said it expects its first-half gross profit to rise 6 per cent to
£41million.

It said
there had been ‘robust demand’ for temporary and contract work among
professionals. The company added it had taken advantage of growing work
in the digital and social media sectors.

Filed Under: finance news

Leave a Reply

You must be logged in to post a comment.

Get Adobe Flash player