Employers face ‘make or break’ time over job cuts

• Third of private sector employers kept ‘surplus’ staff to avoid losing skills

• Many face cutbacks if growth does not return

A survey by the Chartered Institute of Personnel and Development (CIPD) showed that a third of private sector employers had kept on more staff than they needed to avoid losing skills.

But almost two-thirds said they would have to cut back if economic growth did not pick up in the next year.

The warning comes as the Bank of Scotland’s chief economist, Donald MacRae, predicted that Scotland’s economy faces either a low rate of growth or no growth at all for the rest of the year,

The economy is struggling for momentum under the weight of the global crisis as new data showed that private- sector businesses had a challenging start to the third quarter of the year.

Growth in output slowed in July, the bank’s latest monthly Purchasing Managers’ Index (PMI) report shows.

Manufacturing and services show only marginally higher output compared with June and the rate of growth is slowing.

Mr MacRae said: “The July PMI suggests growth in the private sector of the Scottish economy was marginal, with a fall in manufacturing output offset by continuing growth in service activity.

“The Scottish economy is struggling to maintain growth momentum in the face of the global slowdown. Low growth or no growth is in prospect for the rest of 2012.”

A Scottish Government spokesman said: “This Government is working tirelessly to strengthen the economy, with the powers we currently have, and our economic strategy is delivering results – Scotland has a higher employment rate than the UK, lower unemployment, and a stronger GDP performance than the UK over the past six months.”

Figures from the Office for National Statistics showed that unemployment fell to 2.58 million in the three months to May. It had been as high as 2.68 million in November last year.

But the CIPD said the recent trajectory of the jobs market could change course if the economy does not start growing again. The ONS is due to publish its latest data for the labour market on Wednesday.