Employer confidence slows amid continued labour shortages, research warns

Experts say fall from ‘historic highs’ earlier this year was expected, but sentiment is slowly improving

The rate of growth in employer confidence in the UK dropped sharply in the last three months, a poll of employers has found, with hiring shortages contributing to the slow-down.

In its latest JobsOutlook survey, the Recruitment & Employment Confederation (REC) found that the majority of the 600 employers polled were still confident about hiring.

However, its hiring confidence index – which subtracts the percentage of businesses that are not confident about making hiring decisions from the percentage that are – fell 9 percentage points over the quarter to +13.

The REC’s index measuring overall confidence in the economy also fell 13 percentage points to +3, suggesting that a slightly higher number of businesses felt their prospects were improving rather than worsening.

It cited growing uncertainty around rising inflation, continued labour shortages and increasing Covid infection rates as the main sources for slowing confidence.

Despite this, demand for staff remained high, with the REC’s short-term and long-term hiring intentions indexes scoring +22 and +23 respectively.

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Neil Carberry, chief executive of the REC, said it was always likely that employer confidence would drop from the “historic highs” seen when the economy first reopened after the coronavirus restrictions. “So it is good to see that sentiment is still slowly improving,” he said.

But, Carberry warned, worker shortages were still likely to persist for years, adding: “The right skills, infrastructure and monetary policies will all be at a premium in the next few months, especially in the face of rising inflation.”

Earlier this month, the CIPD warned that a quarter of businesses were expecting an increase in hard-to-fill vacancies, but said that many firms were taking steps to improve the way they address recruitment difficulties, including raising pay, upskilling their existing workforces and improving job quality.

Gerwyn Davies, senior labour market adviser at the CIPD, said: “It’s positive to see that some employers are getting better at sourcing labour by taking steps to improve how they recruit, retain and train staff.

“However, there’s a relatively long tail of employers that could be doing more to attract and make full use of available workers,” he said.