The recruitment industry has been giving its reaction to the Budget following George Osborne’s announcement yesterday.

HR recruiter Ortus contends that the rise in VAT to 20% will cost 200,000 jobs. Stephen Menko, UK director of Ortus says: “Previous studies conducted in other European states suggest we can expect over 200,000 job losses from the VAT increase.  

“The Chancellor may well feel that a price worth paying – but it certainly won’t be without its costs. The only way to reduce job losses significantly would have been to decrease other taxes, which is an option the Chancellor didn’t have.”

Martin Hesketh, of umbrella company Brookson, says that the VAT increase was the “biggest announcement” of the Budget, adding: “Interestingly, more than a third of the money the Exchequer is aiming to recover in the current financial year (£8.1 bn) will be accounted for by this tax increase.”

The public sector pay freeze for those paid more than £21,000 also generated reaction. Kieran Ryan, chief executive of The Synergy Group, says: “Although the Chancellor has stated that the budgets for each public sector department will not be revealed until autumn 2010, [the] announcement will undoubtedly result in a hold on recruitment for many public sector departments that do not provide front line services.  

“In contrast, it is likely that council services which are proven revenue sources for local authorities, such as revenues and benefits, parking services and traffic management, will see an increased level of investment and expansion as councils look to recoup the funds they are set to lose from today’s Budget Report.”

Andy Robling, public services director at Hays, said the pay freeze was a cause for “concern”: “A public sector pay freeze for those earning over £21,000 is clearly of concern to staff across all disciplines in the sector. The biggest impact on recruitment will come with the 25% budget cuts; the detail of which won’t be clear until the comprehensive spending reviews this autumn. Before then, pay freezes, the review of pensions and uncertainty around job security is likely to cause some people, particularly those that moved from the private sector in the last couple of years, to re-consider their options.”

Osborne showed commendable restraint on the £2bn bank levy, argues Paul Winchester, managing director of IT recruiter Greythorn: “I’m glad Osborne’s banker-bashing levy, which aims to raise £2bn by asking banks to pay a levy based on the size of their balance sheets, wasn’t as bad as some of us in the City had feared. This is excellent news for IT job growth in London, driven as it is by the banks. 

“The more unattractive Osborne makes the UK look to the international banks, the more money the government will lose in terms of income tax and national insurance contributions as they move jobs abroad. Mumbai and other emerging centres of finance will welcome the banks with open arms. 

“A larger levy on the banks would have been a populist move that would have done much more damage to City jobs and Britain’s economy – let’s not forget the City contributes about 9% of Britain’s GDP.  The Chancellor should be congratulated on his restraint.”