UK faces 'redundancy torrent' as firms cut costs

Friday 31st October 2008

Some 24 per cent of companies have plans to make new or further redundancies in the next twelve months with older workers taking the brunt of job cuts.

The CIPD/KPMG Labour Market Outlook released today shows firms that have already made job cuts are most likely to be planning further cuts in the next 12 months.

Some 15 per cent of firms are planning to make redundancies in the next three months.

Managers, professionals and skilled non-manual workers are most likely to suffer from the redundancy cull, the report found, and 81 per cent of cuts in the private sector will be compulsory.

As firms look to make job cuts, a fifth of the 721 companies polled said they would enforce the government's retirement age policy and make workers over 65 redundant without giving a business reason.

John Philpott, CIPD chief economist, said: "The spectre of redundancy is beginning to haunt the UK jobs market once again.

"Employers have held off from making large scale redundancies until recently but we are now on the verge of a torrent of bad news."

He added: "The onset of recession is already putting jobs at risk but many more are in the firing line as employers consider their next move in a fast deteriorating economic situation."

Dr Philpott added a sharp cut in interest rates from the Bank of England would improve business confidence and "prevent a nightmare scenario for jobs".

The average cost of making a staff member redundant is £10,575.

In the public sector, the average redundancy package costs employers £17,926, compared with the price being £8,981 and £7,629 in the private and voluntary sectors respectively.

"Ideally, employers will do their utmost to limit the scale of redundancies too," said Dr Philpott

"There is a financial incentive for organisations to hold on to staff where they can. This is obviously easier said than done in such tough times, but the business performance of organisations will be strengthened if they have the right people and skills in place to prepare them for the upturn in the economy, whenever it comes."

Dave Conder, KPMG HR director, added: "Redundancy doesn't have to be the only cost reduction option for businesses during difficult times. Closing down recruitment avenues, deploying flexible resource management and simply having controls on optional spending will all help in the long run.

"Redundancy is sometimes a short term fix to the problems that businesses experience in a downturn. There is no doubt many businesses will have to look carefully at their cost reduction options and weigh up the short and long term effects to their businesses."

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