RISING unemployment has been blamed on employers squeezing more productivity from their existing workforce instead of taking on new people.

Speaking at the Hilton Hotel in Maidstone, Royal Bank of Scotland Group chief economist Andrew McLaughlin said firms were no longer adding to the payroll but focusing instead on productivity.

While the UK had a reasonable record on economic stability, it had an unreasonable record on productivity.

Most firms now faced higher input costs but found it hard to pass them on to consumers because of competitive pressures.

Dr McLaughlin said: "They are very careful about adding to the labour force and trying to get more output by changing the way they work or to get more from the existing workforce."

He predicted steadily rising unemployment for the rest of the year. Now 5.1 per cent of the workforce, it could go as high as 5.4 per cent, he said, with jobless increases in all parts of the country, including Kent and Medway.

Overall, the UK was falling back into the pack as far as international competitiveness was concerned. Where once we had been the most business-friendly country in Europe, that was no longer the case.

"In terms of the corporate tax burden, we’ve gone from being relatively lightly taxed to being in the pack," said Dr McLaughlin.

"In any economy, you are trying to get a balance between risk-taking and wealth creation on the one side, and regulation and redistribution on the other. Have we got that balance right?"

Dr McLaughlin forecast that Kent would see an upturn in economic activity this year following a difficult 2005 when consumers spent less and saved more.

"My feeling is that for 2006, we will see a higher level of economic activity across the Kent region," he said. Interest rates and house prices would stay much the same.

"There will be a reasonable glide path for the local economy although it will still be tough for retailers."

He said some would go to the wall because there is more floorspace than we need.