MORE than half of UK businesses expect to make job cuts over the next few months as the impact of the credit crunch deepens and fears of a full-blown recession grow, reports published today have warned.
The latest business confidence survey from KPMG reports that the number of firms saying they will reduce their staff or cut back on new recruits has almost doubled since the start of the year.
The news comes as another report out today – from con
sultancy firm Deloitte – predicts the chances of the UK entering its first recession since the early 1990s "are growing by the day".
According to KPMG, 53% of private and public sector companies now plan to cut jobs, compared with 29% in the first quarter of this year.
A similar number – 52% – are planning recruitment freezes as they look to trim costs during the economic downturn.
KPMG says businesses across all industries have been hit by a "perfect storm" of rising inflation, tight credit conditions and falling consumer confidence. As a result, six out of 10 UK firms are now looking to severely cut back on costs, and job cuts are likely to be the easiest and most obvious solution.
Blair Nimmo, head of restructuring for KPMG in Scotland, warned that Scottish companies are unlikely to prove an exception to the trend, despite hopes at the start of the credit crunch that the large-scale job losses would primarily affect companies south of the border.
"At the present there's clearly a lot of negative sentiment flowing through businesses in Scotland," he said. "I'm not entirely sure on what basis we thought we would be sheltered."
The survey will add to economists' fears over the jobs market, which they say will make or break the UK's chances of weathering the economic storm over the coming year.
According to KPMG, more businesses are now preparing themselves for a protracted slowdown which could last up to five years. Almost 60% of firms surveyed think they will continue to suffer for another one to two years. Close to 20% of UK businesses fear the downturn could linger until 2013.
According to Roger Bootle, economic adviser to Deloitte, their concerns are not misplaced.
In his latest economics review, seen by Scotland on Sunday, Bootle argued that the UK is teetering on the edge of recession and businesses should not rely on an interest rate cut to see them through the tough times.
"With the inflationary threat greater than it has been at any time in the last 15 years, interest rates are likely to be on hold until late this year at the earliest and a hike is not altogether out of the question," he warned.
"We now expect GDP growth of just 0.5% next year – the slowest expansion in 16 years – and the chances that the UK economy will enter its first recession since 1991 are growing by the day. If inflation worries prompt the Monetary Policy Committee to keep interest rates higher for longer, things could turn out to be even worse."
The full article contains 516 words and appears in Scotland On Sunday newspaper.
