Risk of redundancies remains

CIPD research reveals that one in three firms are maintaining staff levels higher than they need in order to avoid losing skills, but will make redundancies if economic growth does not return soon.

The immediate jobs outlook remains positive, bolstered by employers who are holding on to staff to avoid losing skills despite low levels of demand. This is according to the latest Chartered Institute of Personnel and Development (CIPD) Labour Market Outlook survey of more than 1,000 employers, conducted by YouGov.

The report’s net employment balance, which measures the difference between the proportion of employers that intend to increase total staffing levels and those that intend to decrease total staffing levels in the third quarter of 2012, has remained positive at +5 (compared to +6 during the previous 3 months). The report also finds that optimism is higher among private sector SMEs (+46) than large private sector firms (+17), while the net score for the public sector remains negative (- 36).

However, the precarious nature of the current market is highlighted by the finding that almost a third (31%) of private sector firms have maintained staff levels higher than is required by their current level of output during the past year.

The main reason for holding on to labour is to maintain the skills base within the organisation (as reported by 62% of these employers). Meanwhile, almost two thirds (62%) of private sector firms feel that they would be forced to cut back on labour if output or service delivery does not pick up in the next year.

The report concludes that the recent trajectory of the jobs market, which has seen unemployment fall, may change course if economic growth does not pick up.