Brexit leads to ‘softening’ of employment market, claims CIPD survey ⁰

The UK’s decision to leave the EU has resulted in a softening in hiring intentions and businesses should invest in skills immediately, according to the latest CIPD/Adecco Group UK & Ireland Labour Market Outlook. The report is based on employer sentiment in the two weeks before and after the EU Referendum and claims that employers surveyed ahead of the vote were somewhat more optimistic about hiring intentions than those surveyed afterwards. It suggests that the proportion of employers expecting to increase staffing levels over the next three months dropped from 40 percent pre-Brexit to 36 percent following the vote. The net employment balance, based on the difference between the share of employers expanding their workforce and those reducing it, dropped from +21 pre-Brexit to +17 post-Brexit. However, the fall was significantly sharper among private sector employers, with the post-Brexit employment balance declining to +25 from +39.

The survey looks at forward-looking intentions. It finds that many employers expect Brexit to have a significant negative impact on costs and business investment decisions:

• 33 percent of employers expect Brexit will have the effect of increasing their costs, compared with 4 percent that think the opposite
• One-in-five (21 percent) employers expect to reduce investment in training and skills development and equipment as a result of Brexit, compared with 7 percent intending to increase investment in training and skills and 5 percent planning to boost investment in equipment.

Ian Brinkley, Acting Chief Economist at the CIPD, said:

“There is clear evidence some employers have become more cautious about hiring following the vote to leave the EU. While many businesses are treating the immediate post-Brexit period as ‘business as usual’, and hiring intentions overall still remain positive, there are signs that some organisations, particularly in the private sector, are preparing to batten down the hatches. The softening of the British pound and the expectation of further weakness in the currency as we wait to see the terms of our exit from the EU has meant a third of employers expect their costs to increase over the next three months. In response, they’re looking to cut investment in crucial areas like skills development and equipment, but we think this reaction is premature.

“The economy had positive momentum going into the referendum and there is a risk that employers will create a self-fulfilling prophecy if they over-react in the expectation of a downturn. Instead of looking at cuts, now is the time to be talking about investment in people and in processes and equipment that will boost productivity and improve the resilience of businesses and our economy.”

The report also considered the impact of the Brexit decision on the UK’s migrant workforce and how employers were likely to respond. Almost two in three (62 percent) employers said that they currently employ some EU migrants, but of those nearly a third (31 percent) were unable to say what percentage of their workforce is made up of EU migrant workers.

While most employers said that it was too soon to say if their migrant workers were considering leaving as a result of Brexit, one in five employers (20 percent) thought that some of their migrant workforce were already considering leaving the UK over the next 12 months. Looking ahead, among employers that recruit migrant workers, two-fifths (40 percent) believe Brexit will make it harder for them to recruit EU migrants over the next twelve months, with just 2 percent thinking it would be easier.

The Labour Market Outlook also explored how employers are responding to possible restrictions on migrant labour. Among employers taking or planning to take pro-active steps to reassure employees about the anxieties they may have as a result of Brexit, nearly one in five (17 percent) said they were giving some of their EU migrant workforce help with applications to become UK residents or citizens, with public sector organisations most likely to help their employees apply for citizenship (27 percent).

Employers were also asked what information would be most helpful to their organisation regarding the implications of leaving the EU. Roughly two in five most wanted information around employment law and regulations (45 percent) or areas such as working time or the employment of agency workers (41 percent). Around 30 percent identified access to the single market and migration policy as a key area, with the public sector (39 percent) highlighting migration policy as a particular concern in comparison to private sector companies. Relatively few organisations (10 percent) were concerned with moving workers within organisations across national boundaries.