One in three UK employers plans to cut staff this quarter, highlighting the growing risk of a labour market crisis derailing the post-lockdown recovery as government support is withdrawn.

The problem is particularly acute within private companies, with almost 40% expecting to make layoffs, according to a survey of 2,000 employers by human resources body the CIPD and Adecco Group.

Wage growth also looks set to be subdued. Those bosses who do intend to review salaries anticipate making 1% increases to basic pay, compared with 2% this time last year. Even so, hiring intentions rose, indicating that businesses are reshaping in response to the crisis.

The spectre of mass unemployment is looming large over the UK economy as it begins its fragile recovery following months of lockdown. While the government has been paying the wages of 9.6 million jobs at a cost of 33.8 billion pounds ($44 billion) as of Aug. 2, it has started to wind down the program, even as many businesses are still struggling. The Bank of England last week warned unemployment will rise to about 7.5% by the end of the year.

“Until now, redundancies have been low — no doubt due to the Job Retention Scheme — but we expect to see more redundancies come through this autumn, especially in the private sector once the scheme closes,” said Gerwyn Davies, senior labour market adviser at the CIPD. “This will likely be accompanied by a pay squeeze for workers, which is actually to be welcomed to help preserve jobs. This looks set to be a sombre autumn.”

source: Bloomberg