Employer confidence increased in January despite labour shortages, survey suggests

But experts say businesses should focus on workforce planning to overcome the ‘huge participation gap’ in the labour market

Business confidence increased in January despite concerns about inflation and ongoing labour shortages, a poll of employers has found.

The latest JobsOutlook from the Recruitment and Employment Confederation (REC) found business confidence in the UK economy increased by 6 percentage points in the three months to January 2022 compared to the three months to December 2021.

The REC’s confidence index, which subtracts the percentage of respondents that say they are not confident about the year ahead from the percentage that say they are, turned positive in January, reaching +1, suggesting that more firms were positive about the year ahead than not.

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The organisation's hiring confidence index also rose to +17 in the three months to January – 8 percentage points higher than three months to December – with the increase driven largely by demand for temporary work. Hiring intention was highest for short term temporary workers, reaching +28 on the REC’s index.

Hiring intentions also increased for permanent staff, with intentions for short term permanent staff increasing 4 percentage points and intentions for long term permanent staff up 5 percentage points. Hiring intentions for both short and long term permanent staff reached +24 on the REC’s index.

Neil Carberry, chief executive of the REC, said employers were “desperate to hire”, adding that demand for temporary workers was high as “businesses try to kick-start this year’s growth”.

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But, Carberry warned, businesses needed to prioritise workforce planning as there was still “a huge participation gap” in the UK’s labour market. “That means putting serious effort into attracting candidates from a wider variety of backgrounds, training workers to fill the gaps, and retaining their best talent,” he said.

“Hybrid and remote working will be one part of that – we know that more workers are demanding it. But other benefits, conditions and development opportunities are also vital parts of a successful people strategy,” said Carberry.

Earlier this month, businesses were warned they could be forced to work “even harder” to find the labour they needed as official figures showed unemployment continues to fall.

The latest labour market overview from the Office for National Statistics showed that unemployment fell to 4.1 per cent between October and December 2021, down 0.2 percentage points on the previous quarter, while the employment rate rose 0.1 percentage points to 75.5 per cent.

At the same time, vacancies continued to increase to another new record of 1,298,400 in the period November 2021 to January 2022.

Jonathan Boys, labour market economist for the CIPD, warned that this meant employers could find it more difficult attracting and keeping the skills they needed.

“Employers will have to work even harder in 2022 to both find and keep staff as vacancies remain at record levels and more workers take advantage of a job-seeker friendly market to find a new and better job,” he said.