Fears for new spike in unemployment as Shell and GlaxoSmithKline cut jobs

Royal Dutch Shell and drug maker Glaxo­SmithKline fuelled fears of a downturn in the jobs market today after both signalled significant cuts over the next year in Europe and the US. Shell said it would shed 1,000 posts – mainly corporate staff and those involved in "downstream" activities such as refining – to add to the 5,000 it cut last year, while GSK warned that 4,000 staff would disappear from its worldwide operations. The cuts follow warnings that Britain and other western nations could expect further rises in unemployment as businesses struggle to cope with a slow recovery from recession. UK unemployment appeared to bottom out last month. Official figures showed the number of unemployed people fell for the first time in almost two years by 7,000 over the previous quarter to 2.46 million. But several economists have predicted a further surge in jobs cuts as employers seek to drive up profits. And analysts argue that many of the cuts, especially in the pharmaceuticals industry, reflect a wider move to shift manufacturing away from stagnant western markets to fast-growing Asian economies. Last week, AstraZeneca signalled it would make 8,000 jobs cuts over the next year. That followed an announcement by US oil firm Chevron that it planned sweeping redundancies, which unions warned jeopardised the future of 1,400 jobs at a refinery in Pembroke in Wales. GSK said government tax breaks for firms that win patents, announced in last year's pre-budget report, had persuaded the company to commit a further £500m to research in the UK. Chief executive Andrew Witty indicated that as a result of the subsidy, job cuts in the UK would be "in the hundreds and not thousands". GSK employs 99,000 people in more than 100 countries. In 2007, it announced a major restructuring, aimed at reducing its costs by £1.7bn a year. Former Bank of England monetary policy committee member David Blanchflower warned the jobs market remained fragile and unemployment could rise steeply over the next year. Blanchflower has argued for an extension of the Bank of England's policy of low interest rates and quantitative easing to boost the economy, which he believes is in poor health. "In the US we've seen unemployment rates go up one month and plummet the next. The question is how quickly the Bank of England takes away the stimulus, which is crucial to keeping the economy afloat," he said. The Chartered Institute of Personnel Development (CIPD) has predicted a rise in unemployment this year to 2.8 million. Chief economist John Philpott said the latest job figures were a temporary blip and were explained by factors such as school leavers opting to stay at college rather than seek employment. "We expect a further rise because employers have been hanging on to staff in the expectation of a recovery. That recovery is only muted and so they will be forced to let staff go," he said. Vicky Redwood, a labour market analyst at Capital Economics, argued the jobs market was likely to deteriorate rapidly and unemployment would reach 3 million. "In the short term things have improved a little. But we are quite pessimistic and think unemployment will rise quickly and steeply over the next year," she said. Britain's banks have continued to shed jobs in recent months. Lloyds announced a further 585 posts last month to add to the 15,000 it shed last year. And the government is expected to cut thousands of Whitehall jobs over the next year. Redwood said manufacturers would also find life tough, despite the low pound and a pick up in export orders. She said stiff competition in overseas markets would keep profit margins wafer-thin and prevent a growing part of the economy from employing extra staff. Manufacturers have also allowed thousands of staff to shift to part-time working over the last 18 months and a pick-up in orders is expected to result in a switch back to full-time work rather than the creation of extra jobs.