Employers ‘holding their nerve’ against Brexit uncertainty, finds CIPD report

But experts emphasise the importance of improved people management as positive numbers ‘mask underlying weakness’ in economy

UK employers expect to increase hiring over the next quarter, with a surge of employment confidence in the public sector, according to research by the CIPD. 

The latest iteration of its Labour Market Outlook report, which surveyed over 1,000 HR professionals and decisions makers in September 2019, revealed an increase in employer confidence across the board, despite the continued uncertainty around Brexit. 

The report found the net employment score – a measure of the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels – increase to +22, up from +18 in the previous quarter. This jump was more pronounced among public sector employers, where the net employment score jumped from +2 to +14: its highest level in five years.

According to the CIPD, this surge in confidence was most likely influenced by the government signalling the end of austerity.

The report also found a drop in the expected pay increases in the private sector over the next 12 months, falling to 2.2 per cent from 2.5 per cent in the previous quarter. In the public sector, pay expectations rose from 1.5 per to 2 per cent.

However, Jon Boys, labour market economist at the CIPD, emphasised the need for employers to plan for the long term, and said lower wage growth expectations in the private sector were a particular worry. “These are good numbers, but they mask an underlying weakness, which is really worrying,” he said.

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“It's nice to have big positive numbers month on month, quarter on quarter, but economies are built for the long term, and it's the long-term things that worry people like me,” said Boys, noting that productivity still presented a looming problem for the UK economy.

“Productivity is down because businesses aren't investing, and they’re not investing because of the uncertainty,” he said. “[This wider] lack of business investment is pretty scary. That's going to affect the ability to deliver good jobs and pay rises in the long term, and the long term is what matters.”

Boys highlighted that businesses could look to boost the skills and capabilities of their line managers in order to mitigate productivity issues and ensure they are getting the most from their workforces, adding that today’s statistics were, for the most part, “encouraging”.

“Despite the political uncertainty, employers have held their nerve and adopted a ‘business as usual’ approach to their hiring needs,” he said.

The report also revealed an increase in the number of public sector employers increasing salaries in response to retention and hiring difficulties, with 41 per cent of public sector organisations increasing salaries (up from 30 per cent on the previous quarter), and 37 per cent increasing starting salaries to improve hiring prospects (also up from 30 per cent).

Healthcare employers had the biggest problems with recruitment, with 75 per cent of such organisations reporting a struggle with hard-to-fill vacancies. Public administration, defence and education also faced difficulties. 

Sophie Wingfield, head of policy at the Recruitment and Employment Confederation (REC), echoed Boys’ concerns over Brexit, saying that the CIPD figures were similar to the REC’s findings. 

“The labour market is strong, and employers are ready to hire and invest in their staff. However, while hiring intentions are positive, it is vital that we end the current political uncertainty as soon as possible,” she said.

“Politicians must prioritise policies that support and enhance the UK’s flexible jobs market during this election – this will allow businesses, workers and the economy to thrive,” Wingfield added.

Figures released today showed the UK narrowly avoided a recession – classed as two successive quarters of economic decline – in the last quarter. The Office for National Statistics (ONS) reported that GDP grew by 0.3 per cent in the three months to August 2019, following a decline in the previous quarter.

An ONS spokesperson commented that growth had slowed to its lowest rate in “almost a decade”.