IT contractors have been warned that the private companies are not in a position to compensate for large-scale job cuts from the public sector.

According to Dr Paul Sisson, a research fellow at the Institute for Employment Studies, October's public spending review is going to be absolutely key for the future of the jobs market.

Should the government decide to make significant job cuts in a short space of time, then current trends indicate the private sector will not be able to absorb the impact, Mr Sisson explained.

He went on: "In which case, obviously, the level of unemployment would rise under that scenario. I think that's really what we're looking at at the moment."

According to the latest Labour Market Outlook survey from the Charted Institute of Personnel and Development, the proportion of employers intending to make redundancies has increased for the second quarter in succession.

One third of organisations (32 per cent) expect to cut jobs during the next three months, the report finds.