Almost a million jobs, half of them in the private sector, could be lost in the UK as a result of public-sector spending cuts, according to a new report from PricewaterhouseCoopers (PwC), with business services and construction the two sectors likely to be hardest hit by the spending squeeze.
PwC also calculate that private-sector gross output could be reduced by around £46 billion per annum by 2014/15, due to the impact on suppliers to the public sector, For the UK as a whole, total job losses arising from public-sector spending cuts including knock-on effects on the private sector could amount to around 3.4% of total employment (around 943,000 jobs in absolute terms) in 2014/15.
But the effect could be greater in areas such as Northern Ireland, Scotland and Wales, where up to a third of the workforce is directly or indirectly employed by the public sector.
Nevertheless, PwC chief economist, John Hawksworth, said that this was not enough to derail Britain's economic recovery.
"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 2008-09 recession."
He also pointed out that while the sectors such as business services sector will employ fewer people in existing areas of public-sector work, new jobs would be created over time.
Evidence from the 1993-99 fiscal consolidation showed a net rise of around 1.2 million in private-sector employment during those years, he added.
"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."