The CBI survey of 335 employers shows that 29 per cent of employers plan to increase permanent recruitment in the next six months, but the number of recruitment and pay freezes across the economy has risen.

Recruitment freezes have gone up to 9 per cent while pay freezes are up from 14 per cent in October to 23 per cent. In the private sector, the proportion of pay freezes remains unchanged at 16 per cent, while in the public sector 83 per cent of organisations are operating pay freezes.

CBI Director-General John Cridland says that employers are having to take ‘tough decisions’ on pay.

‘Only a quarter of employers can afford to make an award in line with inflation,’ Cridland says. ‘Most are trying to strike a fair balance by offering either modest awards or targeting pay rises on essential staff. As a result, we are seeing very little in the way of wage inflation in the economy.’

However, the CBI remains confident that private sector growth can more than compensate for job losses in the public sector.

Albert Ellis, CEO of Harvey Nash says that the big challenge for the government will be ensuring that public sector workers have the right skills and commercial attitude to move with ease to other roles in the private sector.

He also says that the manufacturing sector has been enjoying particularly strong growth, and is a recruitment hotspot, as is the whole area of smart phone software application development. ‘This is reflected in the fact that a third of employers in manufacturing are planning more generous pay rises. The outlook for graduate recruitment is also brightening, though competition for jobs remains very high,’ he adds.