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Public sector cuts hit private sector jobs

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Almost 500,000 jobs could be lost in the private sector because of the government’s cuts in public spending, pushing the total number of losses to a million, a new report by PricewaterhouseCoopers (PwC) has said.

Before the latest unemployment figures are published, the report by accountancy giant PwC said the output of private firms could be slashed by around £46bn a year by 2014/15 due to the impact on firms supplying the public sector.

Combined with forecasts about the number of jobs in public sector organisations under threat, almost a million workers could face unemployment, the report warned.

PwC chief economist John Hawksworth said: “Predicted levels of public and private sector job losses will be a drag on the pace of the economic recovery, but should not derail it altogether.

“While private sector employment may be affected as much as the public sector, this could be mitigated by increased labour market flexibility on wages and hours worked, as we saw in the 2008-9 recession.

“Although the recovery may not be as strong this time as in the 1990s, we would expect at least some rise in private sector employment over the next five years despite the fiscal squeeze, bearing in mind that this squeeze should allow interest rates to remain lower for longer.”

The business services sector faced the largest impact, with a potential loss of about 180,000 jobs due to reduced public sector demand in current areas of operation, said the report.

Construction firms could lose around 100,000 jobs, PwC warned.

The total number of job losses arising from the public sector spending cuts, including knock-on effects on the private sector, might amount to around 3.4% of total employment - around 943,000 jobs, the study found.

Northern Ireland might lose around 5.2% of jobs, compared with 3.1% in London and the South East, it was reported.

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