November 11, 2019
More news on the patchy effects of Brexit on the UK economy comes in the latest Labour Market Outlook from the CIPD. The report claims that Brexit uncertainty has yet to take its toll on employers’ hiring expectations, with both public and private sector employers expecting 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. Although still positive, private sector pay award expectations have decreased, narrowing the gap between the public and private sector. The forward-looking indicator surveyed 1,016 UK employers in September 2019 on their recruitment, redundancy and pay intentions.
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.
Outlooks for jobs and pay
Despite signalling the end of austerity and ongoing uncertainty around Brexit, 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 percent of healthcare employers struggling to fill these roles, followed by public administration and defence (71 percent) and education (68 percent). Overall 67 percent of organisations who are currently hiring have hard-to-fill vacancies.
Overall median basic pay award expectations for the next 12 months remain at 2 percent. The survey found that 48 percent of employers predict a pay increase in the next 12 months. Inflation remains the largest factor behind pay increases of 2 percent or more, followed by market pressures such as recruitment and retention challenges.
Employers have held their nerve and adopted a business as usual approach to their hiring needs
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 percent last quarter to 2 percent this quarter while private sector pay award expectations moved down from 2.5 percent to 2.2 percent. 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 percent to 70 percent.
There has been a sharp increase in the proportion of public sector employers raising salaries in response to retention difficulties rising from 30 percent to 41 percent in the last quarter. The number of public sector employers raising starting salaries in response to recruitment difficulties has also increased from 30 percent to 37 percent. Where organisations are expecting salary increases of less than 2 percent, 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 as a result of Brexit.
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 suggest 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 which can help workplaces get the most out of their people and unlock their productive potential.”