Additional 100,000 public sector job losses in the pipeline, says ITEM Club report

London Sunday 27 November 2011: The UK’s labour market is set to receive another blow, according to a report released today by the Ernst & Young ITEM Club, with an additional 100,000 public sector job cuts expected to be forecast by the Office for Budget Responsibility (OBR).

The ITEM Club report, which has been released ahead of the Autumn Statement on the 29th November, says that the OBR have been too conservative in their projections for the number of public sector job losses required to meet the Government’s spending cuts.

OBR’s forecast will bring little festive cheer
ITEM expects the OBR to increase its estimate of public sector job losses over the next five years, from the 400,000 it predicted in March to around 500,000.

The report will also warn 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 comments: “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 OBR have been fairly conservative in their estimates of job losses, but the latest data on public sector employment suggests that the causalities could easily be as high as half a million.”