Recession in the UK to claim 3 million jobs by 2010

Joblesness in the UK in 2009 will be the worst in two decades with unemployment expected to rise from 1.86 million to 3 million by 2010. The ongoing recession is expected to claim 600,000 jobs next year with almost half the job loses coming in the first quarter alone, says a report published by the Chartered Institute of Personnel and Development (CIPD).

Thousands of others will have to contend with pay cuts or a salary freeze as their employers struggle to keep businesses going during the country's worst economic downturn since the end of WWII (See: UK faces worst slump since 1948)

CIPD's chief economist John Philpott  says that around this time last year the CIPD had warned that 2008 would be the UK's worst year for jobs in a decade amidst much scepticism. "It was, but in retrospect it will be seen as merely the slow-motion prelude to what will be the worst year for jobs in almost two decades.''

According to Philpott, the 18-month period from the start of the recession in mid-2008 until the end of 2009 will witness the loss of around three quarters of a million jobs, equivalent to the total net rise in employment in the last three years (also see: UK unemployment rising at its fastest pace in 16 years: ONS data).

The report came as economists at HSBC predicted that the global economy would contract in 2009, the first time since the Second World War.

The report said that in trying to deal with redundancies, the human resources department would resemble more like '' ER or Casualty'' as the period between new year and Easter was likely to be the worst for job losses since as employers had been reluctant to issue pink slips in the run-up to Christmas and new year.

Migrant workers, who are hired on short-term contracts, will be the first to be affected and many companies have already scaled back or totally stopped fresh recruitment, while those with short-term employment contracts have seen their contracts terminated.

A survey of 2,604 employees revealed many expected their pay to remain frozen or may have to take a pay cut or get a marginal pay increase.

The report says that with pay being frozen, employers will have to find other ways to motivate their staff by giving non financial rewards.

"Targeting pay increases to reward superior performance, making intelligent use of non-financial rewards, and targeted investment in training and development are all ways of making limited budgets go further in efforts to weather the storm and emerge ready to capitalise fully on the recovery," the report said.

Many large companies have asked employees to take a pay cut, but the results have been mixed; earth-moving equipment maker JCB had negotiated a pay cut in return for limiting job cuts, while at Corus and Vauxhall unions rejected pay cuts, and at Woolworths approximately 27,000 employees will face redundancy as the retailer shuts down for good on 5 January 2009.

The British Chambers of Commerce (BCC) is calling for a pay freeze in minimum wages as business cannot afford to pay higher due to the downturn. The BCC said that it was not opposed to a pay hike when the economy was robust, but with jobs being lost daily and recession underway, it makes no sense to increase the minimum wage.

BCC director-general of David Frost said that since most businesses are prioritising survival at the moment, a rise in the minimum wage would not help firms to hold on to staff and would simply add to unemployment.

The BCC has already written to the UK government's advisers at the Low Pay Commission to keep the minimum wage at current levels of £5.73 an hour for adults, £4.77 for 18-21-year-olds and £3.53 for 16-17-year-olds, till the economy improves.