Job creation is at a "virtual standstill" as employers become increasingly gloomy about prospects for the economy in the wake of the worsening downturn, while smaller firms are cutting staff for the first time in 18 months, new research has revealed.

A survey of more than 700 employers showed the balance between the proportion expecting to recruit staff in the next three months and those lining up to make redundancies has plunged from plus 41 a year ago to just plus 2 now.

The Chartered Institute of Personnel and Development (CIPD) said it was the lowest figure since it launched its labour market outlook survey over four years ago.

A separate report by the CBI showed a huge fall in jobs at small to medium sized manufacturers, with employment prospects expected to get worse in the next few months.

Demand for UK-made goods at home and abroad had weakened during the global economic slowdown, said the CBI after surveying almost 500 firms.