Employer confidence plunges as uncertainty over Brexit bites

New data from the Recruitment and Employment Confederation (REC) shows employers’ confidence in economic prospects for the UK have dropped again, by eight percentage points from last month to net: -28. This is the lowest level since the JobsOutlook survey began measuring sentiment about the economy amongst Britain’s businesses, and is 54 percentage points lower than in June 2016.

Falling confidence in the economy is now affecting hiring decisions in respondents’ own firms. Employers’ confidence in making hiring and investment decisions declined by six percentage points from the previous month to net: -1, the first time this measure has dropped into negative territory since the survey started in 2016.

Despite this weaker outlook, it is clear that employers are ready to hire in some areas – especially where there are skills shortages. More employers planned to increase, rather than decrease their permanent headcount in the short-term, at net: +17. Over the medium-term, forecasts for permanent hiring fell three percentage points this month, but remained positive at net: +22.

Neil Carberry, chief executive of the Recruitment & Employment Confederation, said:

“A year of falling business investment and weeks of Brexit inertia mean no-one should be surprised that employers’ confidence in hiring for their own business is now dropping. For months, businesses have told us that they were concerned about the general outlook for the economy – it is clear to us that this concern is now closer to home. Lower use of temporary labour is a sign of lower demand.

“But our jobs market is robust. Even now, recruiters are finding people new jobs and helping companies to compete. The fact that permanent hiring plans are still positive is a sign that the economy will deliver, if the fog of uncertainty is lifted from British business.

“The extension to the Brexit deadline gives us some space to find a pragmatic deal that will give the UK’s businesses the certainty they need to invest and create jobs. And it avoids a no deal, which the majority of recruiters – in line with the majority of all British businesses – see as deeply problematic for the economy and the jobs market.

“But we cannot delay forever. It is in politicians’ power to make the weaker data we see today a blip. Our labour market is strong. Giving firms certainty about a future deal that supports trade, jobs and investment would get the UK back on track.”

Other statistics from this month’s JobsOutlook include:

• Half (49 per cent) of UK employers expressed concern about the availability of permanent-hire candidates, with a lack of Engineering & Technical and Health & Social Care workers continuing to cause most concern.

• At net: -7, the balance of sentiment for hiring agency workers in the short-term was 13 percentage points lower than a year earlier. Sentiment in the medium term was 21 points lower than last year, at net: -8.

• Following this quarter’s decline in anticipated demand for temporary workers, 35 per cent of employers intending to hire temporary workers expressed concern over the sufficient number of agency workers with the necessary skills they require. This is the same proportion as a year earlier. Employers are expecting the most severe skills shortages among construction workers, followed by education workers and drivers.

• Four in five employers (82 per cent) had either no surplus workforce capacity, or such a small amount that they may need to hire more staff if demand increased.

• Around half of hirers highlighted using agency workers to manage uncertainty (47 per cent), and access to short-term skills (51 per cent), as important reasons to use temporary agency workers.

• Four in five (83 per cent) employers highlighted that the geographical and/or skills sourcing expertise of an agency was an important criterion when selecting their recruitment agency partners.

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