Strong growth in the demand for labour, says new study

There will be strong growth in the demand for labour in the second quarter of 2018, according to new research published today.

The Labour Market Outlook from the CIPD and The Adecco Group shows that employers’ near-term employment expectations have risen to a five-year high. During the past three months, the net employment balance – a measure of the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels in Q2 2018 – increased from +16 to +26.

The CIPD suggests this confidence could be due to employers being reassured that the UK’s existing trading arrangements and freedom of movement will continue during the Brexit transition period and that EU nationals that arrive during that time can stay in the UK indefinitely. It says that the recent strength of the global economy is also providing an uplift to manufacturing and business services.

Gerwyn Davies, senior labour market analyst for the CIPD, says: “Employer optimism about job prospects remains extremely positive which suggests we should be cautious about putting too pessimistic an interpretation on the weak provisional GDP figures released last month.”

Wage growth

Latest estimates from the Office for National Statistics show that average weekly earnings for employees in Great Britain in nominal terms (that is, not adjusted for price inflation) increased by 2.8%, both excluding and including bonuses, compared with a year earlier.

According to the new CIPD/ The Adecco Group research, there are signs that wage pressures may already be increasing for employers. Median basic pay award expectations for the next 12 months remain unchanged at 2%, but average (mean) basic pay expectations have risen from 1.8% to 2.1% over the last quarter, it says.

Tightening of the market

Almost two-thirds (61%) of employers in the CIPD/The Adecco Group survey said that at least some of their vacancies are proving hard to fill.  By comparison, just over half (56%) of employers reported that they were currently having difficulty filling vacancies in their organisation during the same period in 2017. In response, more than a quarter (28%) said that they are raising wages to tackle their recruitment difficulties.

The CIPD is warning that employers’ demand for skills and labour may not be met by supply.

Davies says: “Employers looking to expand their workforces are likely to face growing headwinds as organisations find it more difficult to source the people and skills they need. This may explain why wage pressures are starting to increase. It could well be that employers are using higher starting salaries to attract the talent they need.”

The researchers conclude that employers must make the most of factors other than pay – such as flexible working benefits, modern work-spaces and collaborative working  – to attract key talent and retain employees.

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