Job losses predicted as business confidence plummets

BUSINESS confidence has plummeted to a record low in the wake of the escalating global economic crisis, according to KPMG’s quarterly national business confidence survey.

Around two thirds (60%) of senior executives questioned said they now viewed prospects for UK business as “bad” or “very bad” compared to just a third in May.

A further 47% believe that Britain is already in recession, while 86% claim that the credit crunch has had a negative impact on their organisation.

The number of firms considering making job cuts in response to the dire economic climate has also increased over the summer, leaping from 53% at the end of Q2 to 62% at the end of Q3 2008.

Iain Moffatt, senior partner at KPMG’s Leeds office, said: “The results of our latest survey are truly the bleakest we’ve ever seen – and no small wonder.

“The past month has been one of unprecedented turmoil in the financial markets, with each day bringing yet another extraordinary development that, even in isolation, would have seemed astonishing 12 months ago.”

He added: “This rapid pace of events has undoubtedly spooked British business, leaving many business leaders wondering what next?'”

Mr Moffatt said that it was staggering to think that only one in ten businesses thought that a full blow recession was on the cards back in May while almost half of respondents questioned in this quarter felt that recession was already here.

“Couple this with the fact that the vast majority believe that the economic outlook will only get worse before it gets better, and it’s hard to see anything other than a gloomy winter ahead for the nation’s businesses,” he said.

The survey also found that employment costs are now coming under increased scrutiny with three quarters (74%) of businesses now actively seeking to cut overheads.

Nearly 70% of firms said they intended to implement recruitment freezes, while a further 62% admitted they were considering reducing headcount – up from 53% last quarter.

However, in spite of increased threat of job cuts, half the businesses surveyed plan to reward their staff with wage increases of between 3 and 10%.

As well as wanting to retain the best talent respondents said that inflationary pressures had also influenced their decision to offer a pay rise.

Other negative impacts of inflation cited by respondents included rising costs (42%), reduced profits (34%) and other businesses in the supply chain increasing the costs of their goods and services (32%).

But according to Mr Moffatt the region’s businessess appear to be bucking the downward trend and that many were continuing to perform well.

“For example, more than a third of those questioned in our survey resolutely believe prospects for their own business over the next 12 months to remain good, while only 16% claim to have actually experienced any difficulties in obtaining finance over the last 12 months – a figure which is perhaps surprisingly low,” he said.

“It may be the case that such businesses are tapping into existing cash reserves or still drawing pre-arranged credit lines, in which case, their problems may very well lie around the corner. Or it may well be that many have prepared well for the downturn and are now simply riding out the storm.”