Businesses warned - sack staff and suffer skills shortage

Nov 13 2008 by Chris Robinson, The Journal

LEADING North East economist Paul Mooney last night warned businesses not to sack staff – or face a major skills shortage when the economy picks up in a year.

One North East’s chief economist said trade would pick up at the end of 2009 and firms should be wary of making skilled workers redundant when business starts to improve.

His warning came after new figures showed unemployment rates were rising at a greater rate in the North East than anywhere else, with job losses up by 7,000 compared with the previous quarter.

The hike now leaves 100,000 people out of work in the region, with an unemployment rate of 8%, according to the Office for National Statistics.

And nationally unemployment reached an 11-year high with 1.82 million people out of work, an increase of 140,000 from the previous quarter.

Mr Mooney said businesses may struggle when the market begins to pick up if they cull their skilled workforce and force workers to relocate elsewhere.

He told The Journal last night that it was important all firms get the support and finance they needed to keep trading, predicting that the economy would improve by the end of next year.

And he added that although there was no talk of skill shortages now, it didn’t mean reports of a shortage would not arise in the future.

He said: “We are growth below zero from now through to the middle of 2009 and growth back up towards the end of next year.

“If we look at business problems like skill shortages, we are not talking about that now. But that doesn’t mean the skill losses issue has gone away.”

Ross Smith, head of policy at the North East Chamber of Commerce, said the North East needed to be in the best position to recover as quickly as it can.

He added: “The figures illustrate how difficult it is for many businesses at the moment. But it is important to note that it does not reflect what is happening across all sectors and all jobs.

“That means giving businesses as much support as possible to make sure that we can keep skilled people in the North East labour market.”

Kevin Rowan, regional organiser for the TUC, also urged businesses to be cautious when thinking about redundancies.

He added: “It is depressing but not unexpected. The fact is there’s a real lack of confidence in business across the region and nationally.

“It’s going to be not a particularly severe or long recession. We really urge businesses to be cautious about staff when laying people off as it could be difficult getting them back.”

Mr Mooney pointed out that firms were continuing to invest in the North East.

Within the last week telecoms giant Tech Mahindra announced that it will be creating a new base on South Tyneside with up to 500 new posts.

Washington-based Faraday Printed Circuits, one of the UK’s fewest circuit board manufacturers, invested £300,000 in its North East factory. It hopes the investment should help boost turnover by over 20% to £4.5m and add to the 58-strong workforce.

And AWS Ecoplastics, which has its headquarters in North Tyneside, also signed a £4m deal to fund an expansion to increase its recycling capacity by 400%. The company, which recycles plastic bottles, hopes to achieve its three-year plan to grow the company’s turnover from £5m to £34m per annum and double its 50-strong workforce.

Of the unemployment figures, Mr Mooney said: “We started hitting some of the job losses earlier than elsewhere. The other regions are starting to catch up.

“We have probably seen that companies have been hanging on to their staff for as long as they can, particularly the permanent, and letting go of temporary workers.

“The figures again reflect the extremely tough climate in which businesses are operating at the moment, and this is why it’s so important that we continue to focus on making sure all firms can get the support and finance they need.

“Even in these challenging conditions, firms are still investing in the region.”

Davey Hall, regional organiser for Unite, said greedy fat cats in the finance sector were bleeding working-class people.

He said: “It appears that every time there’s a downturn in jobs, when other parts of the country get a cold the North East seems to get the flu.

“Along with the other trade unions, we are looking to the Government for solutions. However, the reality is we are now in a globalisation environment where practically every single country has been affected by the economic downturn.”