Contractors: Is private sector strong enough to plug the gaps?

Questions have been raised over whether private sector growth will outweigh job losses in the public sector.

There are question marks over whether the private sector will be able to expand to fill the gap left by the shrinking public sector, an organisation has claimed, which could concern some contractors.

Gerwyn Davies, public policy adviser at the Chartered Institute of Personnel and Development, has warned that a growing uncertainty among businesses has suggested that the higher VAT rate and the cuts are beginning to make some firms wary.

He said: "A larger crack will emerge when the real impact of the cuts on the public sector take effect in the autumn."

Mr Davies acknowledged that the most recent set of job figures appears strong and encouraging on the surface but he claimed that "cracks now seem to be emerging", highlighting low pay settlements, a slower decline in claimant count than was expected and the growth of part-time work as concerning factors.

His comments follow the publication of figures from the Office for National Statistics that showed the unemployment rate to have fallen by approximately 49,000 people.