Employers should prepare themselves for slow economic recovery and the potential for “social disharmony” should predictions about the possible loss of 25,000 jobs at local councils in England over the next three to five years come to pass.
According to a survey from business lobbyists the CBI, the growth picture in the UK’s vital service sector, which accounts for 75% of gross domestic product, is a mixed one.
While output across the sector as a whole stabilised over the last three months of 2009, business and professional services companies are continuing to struggle, with more respondents reporting falling business volumes than rising ones.
There was some improvement in the consumer sector, however, which includes hotels and restaurants. Business volumes here were the highest since the credit crunch started in August 2007, with a balance of 7% of firms reporting an increase.
Ian McCafferty, the CBI’s chief economic advisor, said: “Overall, these figures are consistent with our view that the economy as a whole is recovering slowly, but that we will have to wait a while before growth picks up.”
Although companies are more optimistic about their prospects now than they were three months ago, profits in both business and consumer service sectors are being hit by rising costs and organisations are continuing to shed jobs.
“Service sector firms are still concerned about the strength of demand over the year ahead as a constraint on business expansion, and their ability to raise funds also remains a key barrier to growth,” McCafferty said.
Local authorities, meanwhile, are also being hit by a “perfect storm” of falling revenues and higher demand for frontline services as a result of the recession.
A survey undertaken by the BBC of 49 councils with a combined workforce of 256,000 people indicated that more than 70% predicted spending cuts of between 5% and 20%. This situation could lead to job cuts of around 10% to try and cope.
But according to Dave Prentis, general secretary of the union Unison, such a scenario would generate “social disharmony” in inner cities and conflict between local authority employers and staff.
Roads, libraries, the arts and leisure appear to be at the highest risk of cutbacks, while children’s social services, services for the homeless and planning seem to be the safest.
Richard Kemp, deputy chairman of the Local Government Association (LGA), told the BBC that while things were already tight and would get worse from 1 April 2011 when the government’s next three-year spending programme begins.
“We know that if the government ring fences schools, health, defence and the police, other services will need to take a big hit. The LGA view is that everything else will face a cut of 16.5% in real terms. Others believe it could be 18.5%.”
The EEF manufacturers’ lobby group, on the other hand, indicated that employment was picking up, with electronics being the strongest performing sector. But it cautioned that a number of risks still lay ahead. These uncertainty over public finances and continuing challenges over accessing finance.
