UK businesses expect lost profits and thousands of job cuts over the next three years, according to a new study from global management consultancy Hay Group and the Centre for Economic and Business Research (cebr).

The findings suggest that the UK economy will continue another 18 months of slowing growth, which could hit profits by almost £1bn, and result in up to 350,000 job losses.

However, the UK will narrowly escape a full-blown recession, the report concludes.

Russell Hobby, associate director at Hay Group, commented: “Business leaders see tough times ahead – with falling profits eroded further by rising inflation in the short term. Though the economy looks set to avoid recession, UK plc is facing a long, slow climb out of the current dip.”

Business leaders forecast that their company profits will dip by 1.3% on average over the current financial year – a drop equivalent to £900m if applied across the economy. This will be followed by a period of slight recovery as profits look set to grow by 2.7% during 2009/2010.

The study also reveals a worrying trend for employees – business leaders expect to slash jobs in 2008/2009 with workforces diminishing by 1.1% on average. The report’s authors estimate 350,000 jobs are on the line.

Workforce levels are not expected to recover until 2009/2010, when they will return to just below current levels.  

For those managing to retain their jobs, the outlook isn’t too rosy either. Those polled for the survey also predicted a wage increase slowdown – pay-rises are expected to fall to 2.9% in 2009/9.

Despite all the doom and gloom, there is a silver lining according to John Ward, managing economist at the cebr: “With interest rates, inflation and government finances in better health than before the last sustained downturn, we expect the UK economy will escape recession.”

© Crimson Business Ltd.