Employer confidence sinks over economic forecast

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A third of employers think economic conditions are worsening, affecting their short-term hiring and firing intentions

A third (31%) of employers think economic conditions in the UK are worsening, according to the Recruitment and Employment Confederation (REC)’s Jobs Outlook.

The survey of 601 employers found that 28% believed the economy is improving, and the net balance of confidence in hiring and investment decisions dropped to an all-time low of 10%.

The deterioration in confidence created a similar change in sentiment towards short-term permanent hiring intentions. In May and June the proportions planning to add headcount were at 20% and 22% respectively. However, by July the figure dropped to just 14%. Similarly, the proportion intending to cut staff numbers doubled from 2% to 4% between May and July.

REC chief executive Kevin Green said that these findings are worrying. “This drop in employer confidence should raise a red flag,” he said. “Businesses are continuing to hire to meet demand, but issues like access to labour, Brexit negotiations and political uncertainty are creating nervousness.

"Employers in the construction sector are especially concerned as they rely heavily on EU workers to meet the demand for housing and to support the government’s infrastructure plans. The added factor of dropping consumer confidence is putting some businesses on edge. If people reduce their spending businesses will be affected,” he added.

Green said the government should provide more certainty for employers, with greater clarity over the country's Brexit strategy.

“That means clearly laying out what Brexit plans look like and how employers can keep recruiting the people they need from the EU," he said. "The jobs market is in a good place but employers will only continue to hire and invest if they feel assured about the future.”

David Willett, a director at The Open University, said employers need to start looking at recruitment and staff development differently. “It is now more important than ever that organisations invest in their workforce to build up the skills they need rather than buying them in from elsewhere, which can be costly and time-consuming,” he said.

“Many organisations report that the situation is deteriorating, with a shortfall in the skills required to develop the agility needed to adapt to changes in a shifting political, technological and economic climate. Looking forward, it must become a business priority to build skills and capabilities through investing in work-based training for staff at all levels and ages,” he added.

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