UK creates fewer jobs as optimism crumbles

Sophie Kirby and Jonathan Cable London

Job creation in Britain plumbed a near three-year low last month as employers viewed the future less optimistically than at any time since 2007, signalling a likely spike in unemployment days after policymakers moved to shore up an ailing economy.

The British labour market has so far shown resilience in the face of a second recession in four years, and the number of unemployed people in the country has even declined.

But yesterday’s jobs survey by the Recruitment and Employment Confederation (REC) and KPMG showed that the number of permanent placements fell in June at the fastest rate in almost three years.

Economic growth has been held back by a tough austerity programme to cut the deficit.

A survey of chief financial officers by accounting firm Deloitte showed that UK firms have also been rattled by the debt crisis that has raged through the euro zone for two years and shows no sign of abating. The currency bloc is the UK’s largest trading partner.

Deloitte chief economist Ian Stewart said: “Chief financial officers see plenty of risks ahead. Economic uncertainty remains the big constraint on corporate expansion.”

Faced by a likely worsening of the euro zone crisis, the government is under pressure to take steps to revive growth and match stimulus efforts by the Bank of England, which restarted printing presses last week by announcing an additional £50 billion (R638bn) of government bond buys.

Both surveys were collated prior to the Bank of England’s policy announcement.

The REC permanent places index, which measures how many extra workers are being hired, dropped to 46.8 in June, down from 51.0 in May. A reading below 50 signals a decline in placements.

“A decrease in hiring activity means (a possible) period of increased unemployment, especially as a new wave of school leavers and graduates enter the labour market over the summer,” said REC chief executive Kevin Green.

The number of temporary placements fell for a seventh consecutive month while average pay for permanent and temporary staff was broadly unchanged. – Reuters