Job Market

Third of organisations set to cut jobs in Q3

UK job prospects remain weak, with one in three (33%) organisations expecting to cut jobs in the third quarter of 2020, according to new research from the CIPD and the Adecco Group.

The latest quarterly Labour Market Outlook report shows a 50% increase in the number of organisations expecting to cut jobs compared to the spring report, rising from 22% three months ago to 33%. Twice as many private sector employers (38%) expect to make redundancies compared to the public sector (16%).

The survey of more than 2,000 employers found that overall hiring intentions have increased, with almost half (49%) of employers expecting to take on new recruits in the next three months, compared to 40% last quarter. However, this confidence remains well below levels seen in previous years.

It also found that employment confidence has fallen in all three sectors of the economy: private, public and voluntary. The report’s net employment balance, which measures the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels, has fallen from –4 to –8 over the last three months.

The survey also shows that employers across all sectors intend to keep a ‘tight rein’ on pay increases over the next 12 months. Those who plan pay reviews expect basic pay to increase by 1%, much lower than the 2% median increase expected this time last year.

Median basic pay expectations in the private sector have increased to 0.8% from 0% three months ago.

Gerwyn Davies, senior labour market adviser at the CIPD, the professional body for HR and people development, said: “This is the weakest set of data we’ve seen for several years. Until now, redundancies have been low – no doubt due to the Job Retention Scheme – but we expect to see more redundancies come through this autumn, especially in the private sector once the scheme closes.

“Hiring confidence is rising tentatively, but this probably won’t be enough to offset the rise in redundancies and the number of new graduates and school leavers entering the labour market over the next few months. As a result, this looks set to be a sombre autumn for jobs.”

She added: “This will likely be accompanied by a pay squeeze for workers, which is actually to be welcomed to help preserve jobs despite any modest fall in real wages in the private sector. This could be an important factor in limiting large-scale job cuts, as it was in the last recession.

“We urge organisations to do all that they can to keep employees in work and only make redundancies as a last resort, exploring all other options first. This could include freezing recruitment, reducing hours or restricting overtime, or cuts to bonuses and deferring salary increases.”

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