By Maximilian Clarke

The UK jobs market is heading for a “slow and painful contraction”, the Chartered Institute of Personnel Development (CIPD) concluded in their latest jobs report.

Organisations are planning to scale back all employment-related operations, including hiring, redundancies, offshoring and overseas recruitment as UK’s employment situation deteriorates further in 2011.

The CIPD’s Labour Market Outlook employment index - which measures the difference between the number of employers intending to increase total staffing levels and the proportion planning to decrease them — fell to -3 from -1 in the past three months. This was the second successive quarterly fall and the lowest net balance since last winter.

The private-sector looked set to grow in the next three months (+20), but at a slower pace than in recent quarters, found the study. Confidence in the public-sector remained low (-50) for the next three months, and was even more subdued for the year ahead (-57). Meanwhile, the voluntary sector saw no movement in net employment intentions for the fourth quarter of 2011, remaining at +7.

The CIPD said employers appeared to be “hedging their bets” on all employment-related decisions in response to the current economic uncertainty, with both hiring intentions and redundancy intentions down across all sectors compared with recent previous reports.

Gerwyn Davies, public policy adviser at the CIPD, said there was no immediate sign of UK labour market conditions improving in the short or medium term.

“The figures point to a slow, painful contraction in the jobs market,” warned Davies. “Many firms appear to be locked in ‘wait and see’ mode, with some companies scaling back on all employment decisions against a backdrop of increasing uncertainty as a result of the eurozone crisis and wider global economic turmoil.

“The good news resulting from this lull in business activity is that fewer employers are looking to relocate abroad or make redundancies,” he continued. “The downside is that recruitment intentions are falling, which will make further rises in unemployment therefore seem inevitable given that public-sector job losses are outpacing the predictions made by the Office for Budget Responsibility.”

The proportion of firms intending to hire migrant workers - which has risen steadily in recent consecutive quarters - also fell to 19 per cent from 25 per cent during the past three months.

The number of firms planning to offshore jobs to other parts of the world also decreased to 6 per cent from 10 per cent in the past year. India remained the most popular destination for offshoring, with half of the employers surveyed by YouGov planning to locate some or all of their operations in India. The functions most likely to be offshored were finance and accounts and IT support.

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