Over a quarter of UK firms have been hanging onto staff that they can't really afford, in order to keep skills in house, said the CIPD. But almost two thirds of private sector firms will be forced to cut back on labour if output or service delivery does not pick up in the next year.
The CIPD surveyed 1,000 UK firms in order to measure the UK's net employment balance - the difference between the number of employers that intend to increase total staffing levels and those that intend to downsize in the third quarter of 2012. For now, the balance remains positive at +5 (down from +6 during the previous three months). But that could all change if we don't see a real uptick in the UK economy.
Gerwyn Davies, Labour Market Adviser at the CIPD, says: 'Recent falls in unemployment suggest that the labour market is on a sound footing, but a closer examination reveals that many employers are holding on to more staff than is required. This is a make or break moment for employers.'
On the plus side, while small firms are preparing for a tough year, they are still overwhelmingly positive. The CIPD puts the SME optimism score at +46 compared to the 'glass half empty' larger private sector firms, which have an optimism score of just +17. In the public sector, the results are rather more negative: - 36.