Job losses look set to increase as the outlook for employment worsens and cuts spread to the public sector, a new report claims.

A survey of more than 700 employers also revealed a “substantial” fall in employment intentions among public sector organisations, marking a “difficult” first quarter of the year for jobs.

Plans need to be made now, so that the public sector is ready to respond immediately

The Chartered Institute of Personnel and Development said the jobs market was still “on the ropes”, with a number of concerns ahead, including more outsourcing of work.

It added that more employers were planning to cut staff rather than hire new workers, and the outlook was particularly “bleak” in the public sector.

Alan Downey, head of public sector at KPMG, which helped with the research, added: “These figures clearly show that the starting gun for a public sector recession has been fired

“Reducing the pay bill, whether through a pay freeze or headcount reductions or both, is an obvious way to cut costs quickly. Other options that need to be seriously addressed include consolidating operations to improve efficiency and release property and other assets for disposal and reconfiguring service delivery in order to reduce costs while maintaining quality.

“Some of this can be achieved quickly, but many of the changes that are needed will require careful planning. Plans need to be made now, so that the public sector is ready to respond immediately, whenever the incoming government decides it is time for the axe to fall.”

The CIPD report shows almost a third of public sector employers plan to reduce headcount in the first quarter of 2010.