Another 100,000 public sector jobs could go, says E&Y
The UK’s labour market is set to receive another blow with up to 100,000 further public sector job cuts expected to be forecast by the Office for Budget Responsibility (OBR), according to Ernst & Young.
The firm’s ITEM club report – published ahead of the Chancellor’s Autumn statement tomorrow – argues that OBR has been too conservative in forecasting the impact of public sector cuts to date.
It argues that the OBR likely to increase the estimated number of public sector jobs to be lost over the next five years from the 400,000 it predicted in March to 500,000.
The ITEM club also warned that a deteriorating economic outlook, caused by an escalation of the Eurozone crisis and weakening consumer demand, will force the OBR to slash its UK GDP forecasts for 2011 and 2012 from 1.7% and 2.5% respectively, to 0.9% and below 1.0%.
Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, said: “The economic outlook has darkened considerably since the OBR’s last forecast in March, and so next week’s statement is likely to bring little festive cheer to the Government.
“The UK’s unemployment rate is already at 8.3%, but there’s worse still to come. As the public sector spending cuts start to feed through towards the end of this Parliament, the axe is inevitably going to fall on the labour market.”
The report also suggests that government borrowing is likely to increase to £109bn by 2012/13 – £8bn higher than previously forecast. However, it added that the economy should maintain enough momentum for the government to meet its fiscal mandate of eliminating the structural budget deficit within the next five years.
