UK unemployment 'to keep rising'

The figure estimated by accountants BDO represents a considerable increase from the 2.47 million people who are currently out of work.

The group said that after falling for several months, its employment index had levelled off at 93.6 in October, virtually unchanged from the previous month.

It said this suggested firms were holding on to staff in readiness for the recovery. But it warned that the flipside of this was that with private sector companies retaining existing staff, there was unlikely to be a boom in recruitment when the upturn took hold.

At the same time, public sector employment levels are set to start falling as the Government is forced to introduce cost cuts, leading to further increases in unemployment in late 2010 and beyond, it said.

The group added that its output index suggested that a strong upturn may still be some way off, as groups failed to grow their order books.

Peter Hemington, partner at BDO, said: "Britain's bosses will have difficult decisions to make when the upturn arrives, including continuing to take a close look at their workforces.

"Many companies have done their utmost to hold on to staff, so they are unlikely to be advertising for new recruits even when demand increases. Unfortunately there will be no silver bullet for unemployment when recovery does arrive."

Meanwhile, separate research showed that small and medium-sized companies are feeling their most optimistic since April 2007 following signs that demand for their goods may be stabilising.

Four out of 10 of the firms reported a decline in new orders during the three months to the end of October, but 24% said they had seen a rise, according to the Confederation of British Industry.