UK employers still hiring despite Brexit uncertainty

Brexit uncertainty has yet to take its toll on UK employers’ hiring expectations: both public and private sector employers expect staff numbers to increase in the final quarter of 2019.

There has been a surge of confidence among public sector employers on increasing both pay and staff numbers in the next quarter. Though still positive, private sector pay award expectations have decreased, narrowing the gap between the public and private sector.

These are the findings of the latest Labour Market Outlook report from the Chartered Institute of Personnel and Development (CIPD), the professional body for HR and people development. The forward-looking indicator surveyed 1,016 UK employers in September 2019 on their recruitment, redundancy and pay intentions.

Recruitment outlook

Overall, employer confidence remains robust. The report’s net employment score – a measure of employment confidence – remains positive. It has grown from +18 to +22, driven by a larger proportion of employers expecting to increase, rather than decrease, total staffing levels. The score is highest in construction (+38), administration and support services (+30) and healthcare (+30).

The uptick in hiring expectations was broad based across business sectors, but saw a significant surge among public sector employers. The public sector employment balance rose sharply in the last quarter from +2 to +14. This marks its highest point in more than five years and was most likely buoyed by the Government’s signalling of the end of austerity.

Job vacancies

Despite the signalling of the end of austerity, there are still challenges in both attracting and retaining staff in the public sector. Employers in public-sector-dominated industries record the highest incidence of hard-to-fill vacancies, with 75% of healthcare employers struggling to fill these roles, followed by public administration and defence (71%) and education (68%). Overall, 67% of organisations that are currently hiring have hard-to-fill vacancies.

Pay outlook

Overall median basic pay award expectations for the next 12 months remain at 2%. The survey found that 48% of employers predict a pay increase in the next 12 months. Inflation remains the largest factor behind pay increases of 2% or more, followed by market pressures such as recruitment and retention challenges.

The renewed confidence among public sector employers has meant that the gap between public and private sector employer intentions on pay has narrowed. The public sector continues an upward trend on pay award expectations, rising from 1.5% last quarter to 2% this quarter, while private sector pay award expectations moved down from 2.5% to 2.2%.

While private sector pay award expectations have fallen, the proportion of private sector employers set to raise salaries in response to retention difficulties has increased from 65% to 70%.

There has been a sharp increase in the proportion of public sector employers raising salaries in response to retention difficulties, rising from 30% to 41% in the last quarter. The number of public sector employers raising starting salaries in response to recruitment difficulties has also increased from 30% to 37%.

Where organisations are expecting salary increases of less than 2%, the three top reasons cited were organisations’ inability to pay more, followed by restraint on public sector pay and uncertainty about future access to the EU market.

“Employers have held their nerve”

Jon Boys, labour market economist for the CIPD, said: “Despite the political uncertainty, employers have held their nerve and adopted a ‘business as usual’ approach to their hiring needs. The UK’s jobs machine continues to deliver, with businesses expecting staff numbers to increase in the final months of 2019. The easing of cost constraints on the public sector has seen hiring and pay expectations increase sharply in the past quarter, but healthcare employers continue to struggle with hard-to-fill vacancies.

“Lowered expectations about future wage growth in the private sector – where the majority of people are employed – are a worry, and that suggests that recent gains in pay won’t be sustained. Without a focus on productivity, these gains are built on sand. A starting point is to focus on people management practices that can help workplaces get the most out of their people and unlock their productive potential.”

To find out whether your people management practices are holding you back rather than helping you maximise your productivity, email me or call me on 020 7099 2621.