UK recruitment is set to slow sharply, according to the latest Labour Market Outlook survey from the Chartered Institute of Personnel and Development (CIPD) and KPMG. 

The Outlook net employment index, which measures the difference between the proportion of employers that intend to increase total staffing levels and those that intend to decrease total staffing levels in the third quarter of 2011, has fallen to -1 from +3 in the quarter.

Long-term prospects are even worse, with the 12-month employment index sliding to -6 from +2 last quarter.

The index also reveals that the private sector will grow (+23), but at a less solid pace than the previous quarter (+32), while confidence in the public sector remains at the same negative level as last quarter (-51 compared to -52). The voluntary sector remains just in the black (+7 compared to +6).

Gerwyn Davies, public policy adviser at the CIPD, says: “Increasing uncertainty about growth prospects in both the UK and global economies is now affecting hiring intentions; particularly in those industries such as manufacturing that stand to lose most in the event of a global slowdown. This will concern the government as it attempts to rebalance the economy towards exports and investment. 

“Together with the public sector redundancies, which will affect one in 20 front-line workers according to our survey, the recent story of an employment revival may become one of an employment relapse. The survey evidence suggests that the relapse will hit some regions much harder than others, which points to the further development of a two-speed economy.”

Andrew Smith, chief economist at KPMG, adds: “The economic storm clouds are gathering. Fiscal tightening and the squeeze on real incomes, a worsening debt crisis in the Eurozone and barely stall-speed growth in the US are all affecting prospects for growth in the UK.

“Of particular concern is that hopes of a general rebalancing in the economy, away from consumption towards exports and investment, are being dealt a blow by sinking manufacturing confidence – undermining hopes that cuts in public sector employment will be offset by the private sector.”