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The number of major employers planning cuts to their workforces has doubled in the last three months, suggesting the biggest shakeout in the jobs market may be yet to come. Of more than 200 executives questioned, six out of ten said they were about to cut costs, and more than half – 53% – expected to reduce headcount, up from 29% in March. So far, most layoffs have been confined to sectors fully exposed to the credit crunch, like financial services, but the survey suggests rising inflation is now unsettling the majority. Nearly eight out of 10 said inflation would mean higher costs for their business, seven out of 10 said it would hurt their profits and 67% said their staff would cite it to justify higher pay. Speaking to the Mail on Sunday, Malcolm Edge, head of markets in the UK for KPMG, which commissioned the figures, explained why business confidence was falling. “The clouds that were on the horizon when we first conducted this survey back in early spring are now right overhead. “Businesses are feeling the impact of this ‘perfect storm’ of rising inflation, tightening credit controls and plummeting consumer confidence.” In a separate report released yesterday, Roger Bootle, economic advisor to Deloitte and Touche, said that interest rates would need to fall to 3.5% by the end of 2009 to tackle decreasing growth. But inflation fears inhibit the Bank of England from cutting rates, particularly before next year, by which time house prices will fall by up to a third. “Import price inflation is already at a 15-year high,” he added. “All of this is seriously bad news for the housing market. “Eventually inflation concerns will ease and interest rates will fall sharply. But by then it will be too late to prevent the economy from entering a deep downturn.” According to the KPMG survey, 52% of executives said they wanted interest rates to be frozen at their current level, and a third bemoaned past cuts for not benefiting anyone. Jul 28, 2008 Email this article Printer friendly page Previous Page
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