Employers scaling back hiring plans ahead of Brexit, new data reveals

Experts say solving skills shortages and declining productivity must be top of government’s to-do list

Heightened political and economic uncertainty around Brexit is continuing to weigh heavily on hiring activity, resulting in employers scaling back recruitment plans ahead of the upcoming ‘no deal’ deadline. 

The latest Report on Jobs by KPMG and the Recruitment & Employment Confederation (REC) found the number of people placed into permanent employment in the UK declined for the seventh consecutive month in September.

The report showed a 48.1 index reading for permanent placements in September, up 1.1 on the index from August but still below the no-change point of 50, indicating a declining number of new roles.

All four of the English regions monitored in the report registered lower permanent staff appointments in September apart from the north of England, which saw an index reading of 50.3. 

Neil Carberry, REC chief executive, said ongoing Brexit uncertainty – it remains unclear whether a no-deal Brexit is fully off the table or whether a new deal can be achieved with the EU before 31 October – had led many firms to delay project and hiring decisions, despite businesses being positive about their own prospects after the UK leaves the EU.

He added that there were “deeper issues” in the economy that needed to be addressed to secure the UK’s future prosperity. “Productivity is falling, and there are skills shortages in vital sectors across the economy,” Carberry said. “Solving these problems must be top of the government’s to-do list once the Brexit deadlock has been broken.”

Jonathan Boys, labour market economist at the CIPD, said it was not unusual to see employers “sit and wait it out” in times of uncertainty. “With this [Brexit] deadline we still don’t know what is going to happen, so it is not surprising that peculiar things are happening. We are seeing a confluence of a lot of factors at the moment including drops in permanent placements, slight increases in vacancies, wage growth and low productivity,” he said.

But he added: “Largely, employers have followed a ‘business as usual’ approach because they still need to do things and hire people.”

Boys said it was important for employers to keep an eye on future policy changes, but any major legislative shifts such as a new immigration system would likely come with plenty of warning and employers were unlikely to be caught by surprise.

He added that employers needed to maintain an open and continuous dialogue with employees to keep them abreast of the situation. 

Separate figures released today by the Office for National Statistics (ONS) have suggested Britain’s productivity problem remains unsolved, with the economy experiencing its steepest drop in output per worker in five years.

The ONS reported that productivity fell by 0.5 per cent year-on-year in April to June 2019 when compared to the same quarter last year – the biggest drop since the second quarter of 2014. This is the fourth consecutive quarter that productivity has seen negative quarterly year-on-year growth rates.

Richard Heys, deputy chief economist at the ONS, said labour productivity had continued the “weak trajectory” it followed over the last year. “Both manufacturing and services saw a fall on this time last year, with only a couple of other relatively small sectors contributing positively,” Heys said. “This confirms the broad base of the UK’s productivity challenges.”

The ONS said services and manufacturing saw a fall in labour productivity growth of 0.8 per cent and 1.9 per cent respectively, compared with the same quarter in the previous year.

Non-manufacturing production and construction were the only sectors to improve their productivity, demonstrating growth of 0.3 and 0.1 percentage points respectively.