Nearly 500,000 people will lose their jobs in the public sector over the next four years as part of the Coalition Government’s Spending Review.

Chancellor George Osborne confirmed that 490,000 jobs will go.

Many retailers, including Kingfisher’s Ian Cheshire, have said that rising unemployment is the key index which affects their businesses, as it affects consumer confidence and dampens discretionary spend.

The confirmation raises the prospect of a widening North South divide, as the North is more reliant on public sector employment.

The Chancellor said “much” of the headcount reduction would be achieved through natural staff turnover.

But he added that “yes, there will be some redundancies, but that is unavoidable when the country has run out of money”.

Osborne said: “To back down now and abandon our plans would be the road to economic ruin.”

Osborne said the Government would make the “largest ever financial investment” in adult apprenticeships, with a 50% increase in funding helping an extra 75,000 people in the next four years.

He confirmed that the building of Crossrail - the new London and South East transport link - will continue.

He added: “We have put the national interest first. We have taken our country back from the brink of bankruptcy.”

The British Retail Consortium said retailers support the urgent action to reduce the budget deficit and the Government’s commitment to provide early certainty over which jobs and services will go in detailed departmental business plans due next month.

It said its own research shows uncertainty over where and how the cuts are to be applied has contributed significantly to sluggish growth in non-food retailing.

The BRC also welcomed the government’s commitment to invest in the infrastructure which will support private sector growth. It now calls for consistency in government policy to give retailers the predictability they need to make investment decisions and contribute to the private sector-led recovery.

Stephen Robertson, British Retail Consortium Director General, said: “These are serious plans to tackle the Budget deficit and will remove some of the uncertainty which was driving down consumer confidence. Beginning to deal with the deficit now is right. Delays would just store up more pain for later, risking increased borrowing costs, higher taxes and more job losses. 

“But individual households and communities will continue to be cautious until the impact on their future prospects is clear.  Retailers need the Government to communicate exactly how the cuts will be delivered as soon as possible so that they can make investment plans.

“It’s a tough judgement but the Government has achieved the right balance between public spending cuts and tax increases. The situation needs to be monitored carefully. There are testing times ahead. January’s VAT increase will have an impact on sales and we’re expecting a tough trading environment in the first quarter of 2011. The Government should avoid any further steps which might cause nervous consumers to take flight or deter businesses from taking on new staff.” 

Jonathan De Mello, Head of UK Retail Consultancy at property agent CB Richard Ellis said: “Though clearly necessary to remove the significant amount of debt in the economy, the programme will certainly have an impact on retail sales, particularly affecting areas where GDP is driven by public sector employment and expenditure.

“These regions face the risk of negative consumer spending due to rising unemployment and reduced government expenditure.”

Senior retailers backed the coalition’s public spending cuts this week saying that a watered down plan would result in £100bn of additional debt, a rise in interest rates and further tax rises.

Among those who signed the letter to the Daily Telegraph were Asda chairman Andy Bond, Carphone Warehouse chairman Charles Dunstone, Next chief executive Lord Wolfson, Marks & Spencer chairman Sir Stuart Rose and Alliance Boots executive chairman Stefano Pessina.

More to come…….