The CIPD has warned that 2008 will be the worst year for jobs in more than a decade in a downbeat new year message.

The organisation predicts there will be a net rise in employment of just 75,000, a third of the figures forecast in 2007 and 2006. It expects unemployment to rise by 150,000, to 1.8m.

"A downward trend in public sector employment in the past two years has been more than offset by rising numbers of private sector jobs," said John Philpott, chief economist at the CIPD. "But 2008 will be the first year for a decade that the engine of job creation will be spluttering right across the economy.

"With higher fuel costs and food prices set to raise the cost of living in the first half of the year, the squeeze on real incomes experienced by many workers in 2007 will continue to bite in 2008," he added.

But while many companies will be forced to lay off staff during the coming year, a sluggish job market could be good news for small firms that are flourishing, as they will face less competition for new recruits and are less likely to have existing staff move on.

A survey by employment agency Manpower revealed that UK employers were expecting to take on new workers at their slowest rate in six years in the light of the global economic crisis, while the Institute of Directors has warned that the economy faces its most uncertain time for 15 years.

"Much weaker growth and stubborn inflation will be the UK economic story for 2008," said Graeme Leach, chief economist at the IoD. "The years of plenty look as though they are about to end."

There are also fears that the credit crunch could impact on both consumer and business spending, putting the future of small companies reliant on such trade at risk.