Make or break moment for employers

Employers are facing a "make or break" moment, with many firms fearing job losses if the economy does not improve in the next year, according to a report.

A survey of 1,000 employers by the Chartered Institute of Personnel and Development (CIPD) showed that a third had kept on more staff than they needed so they could maintain their skills base.

Almost two out of three said they would have to cut back on jobs if economic growth did not pick up in the coming 12 months.

Unemployment has been falling in recent months, but the CIPD said its study showed that the jobs market could change.

Gerwyn Davies of the CIPD said: "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 by the current level of demand in order to retain their skills.

"This is a make or break moment for employers - unless growth picks up many will find that they cannot hold on to some workers any longer. The tenacity with which employers are hanging on to skilled labour is a reflection of the high value they place on it and the damage they fear will be done to their businesses if they are forced to start making more redundancies.

"The spare capacity implied by the research suggests that firms are ready to increase their output quickly if demand grows, but there is only so long they can hold out for growth.

"The labour market is approaching a game-changing phase - one that could shape Britain's capacity to compete for a generation."

The report, published ahead of new unemployment figures on Wednesday, also showed that public sector organisations were predicting average pay rises of 0.2%, compared with 2.5% in private firms.