UK jobs boom set to end as finance and business sectors lose confidence

The boom in the UK jobs market is coming to an end just as the Brexit countdown reaches its final stages. According to the latest ManpowerGroup Employment Outlook Survey, the national Outlook for the second quarter of 2019 has fallen to +4 percent, on a par with the weakest levels of confidence seen in recent years. More worryingly, the negative Outlook in the Business and Financial services sector – which employs nearly a fifth of all UK workers – suggests jobs are set to be lost in Britain’s most important sector. The report found that the Finance and Business Services sector has fallen five points to -1 percent, only the second time in the last decade it has been in negative territory.

The sector has now recorded its least optimistic year since the depths of the financial crisis in 2009, with an average Outlook of just +2 percent. This aligns with a gloomy Outlook in London, the sector’s engine room, where hiring intentions dipped to +1 percent, the lowest level in over a year.

Says James Hick, Managing Director for ManpowerGroup Enterprise: “Against a bleak backdrop of low economic growth and Brexit uncertainty, UK employers have bucked the trend and kept on hiring. The UK jobs market has been like a party that no-one has wanted to leave, and the ONS recently reported a 440,000 increase in employment in the past year. However, this quarter we are seeing signs that the good times are coming to an end as several sectors have turned negative.”

Hick continues: “The Finance and Business Services sector employs around six million people and includes the likes of lawyers, bankers, architects and estate agents. Next quarter, employers in the sector are expecting job cuts. We should be under no illusions about just how serious this is – not just for those workers directly affected, but the UK economy as a whole. London’s place at the centre of the financial world still looks uncertain. We have heard a lot about banks moving operations out of London, which is having an impact. Take Bank of America, which recently revealed that it has spent $400m on moving employees and operations to Dublin and Paris, in preparation for Brexit. But it is not just uncertainty that is put the brakes on hiring in financial institutions.

“We are at the end of an unprecedented era of hiring to deal with huge compensation claims on the back of PPI and other mis-selling charges. A whopping £32bn has already been paid out by the banks, requiring enormous amounts of administration and creating tens of thousands of jobs. With average pay outs of £3,000, PPI settlements were even stimulating automotive and retail sales – so while this may be a relief in many ways for the banks, it is less positive for other sectors.”

Another sector that is much more downbeat this quarter is Transport, Storage and Comms, which has now recorded a negative employment Outlook for three straight quarters, reaching -4 percent this quarter, its least optimistic Outlook since 2010.

Hick again: “Companies are looking to stockpile storage space at the expense of hiring drivers, leading to negative hiring intentions in the sector. The UK Warehousing Association recently reported that three quarters of UK warehouse owners say their space is full to capacity and storage costs have soared by up to 25 percent in the past three months – suggesting that many are more concerned about having somewhere to put their goods rather than the need to move them around.”

Ten out of the UK’s 12 regions report a fall in confidence since last quarter. The East of England is, along with Wales (down nine points to 0), the biggest faller, down from +12 percent to just +3 percent. The North East is teetering on 0, down five points and the region’s lowest level since Q4 2015. Yorkshire (+5 percent) is down three points and also down on its average Outlook over the last two years.

The ManpowerGroup Employment Outlook Survey is based on responses from 2,124 UK employers. It asks whether employers intend to hire additional workers or reduce the size of their workforce in the coming quarter. It is the most comprehensive, forward-looking employment survey of its kind and is used as a key economic statistic by both the Bank of England and the UK Government.