Britain spending cuts said to hurt private sector jobs

Fiscal austerity measures could also hurt the private sector, with companies that supply the government cutting jobs and output, accounting firm PricewaterhouseCoopers said in a report on Wednesday.

The private sector could lose almost half a million jobs, and 46 billion pounds in annual gross output by 2014-2015, as government efforts to slash a record budget deficit ripple along the supply chain, the report said.

Northern Ireland will be hit hardest, as will jobs in business services and construction.

In sum, austerity measures may chop 3.4 percent from total employment, in both the private and public sector, according to the report.

The Office for Budget Responsibility has said that 600,000 public sector jobs could be lost as the government cuts spending.

However, fiscal consolidation should not lead to a double-dip recession, as many fear, because job losses will be offset by lower interest rates that encourage private sector growth, said John Hawksworth, chief economist at PwC.

The job losses “will be a drag on the pace of the economic recovery, but should not derail it altogether,” he said.

To cut costs, the government may also outsource some jobs to private companies, though the effect on employment will be more incremental, Hawksworth said.

And outsourcing may provide scant relief for those most hurt by cuts, since “areas where private sector jobs may come may not be the same areas where jobs will be lost,” Hawksworth said, adding that the government will have to get creative in filling the gaps.

While the OBR forecast that the private sector will provide 1.6 million jobs over the next four years to make up the shortfall in public sector employment, Hawksworth said the numbers were ambitious, as recent indicators have been worse than expected.

“I expect the OBR to revise down growth and employment numbers, and back off from their slightly bullish forecast,” he said.

Source: Reuters