Following another hike in interest rates, The Bank of England has forecasted that a recession will hit the UK markets in the last quarter of 2022 and will continue throughout 2023 (BBC News). Whilst this news are unsurprising to most, we are still uncertain how this will affect the UK labour market and our current hiring boom.
For the past few years, we have seen a hiring boom. The market has been hit with an influx of opportunities. Candidates have been seen as the driving force behind salaries, company culture and even strategic decision making. This is predominantly in line with the lifting of lockdowns at the beginning of 2021 and employers looking to replenish staffing levels from previous redundancies. This has meant that we have faced an increasingly tighter labour market, month on month.
According to Jonathan Boys (CIPD Labour Market Economist), this is due to the labour market being a “lagging indicator” of the market as a whole. Employers are still focussing on staff retention and it is reported that redundancies “will stay low in the following quarter”. This is based on the recent CIPD Labour Market Outlook which found:
- The net employment balance remains high at +34
- 47% of employers have hard to fill vacancies (specifically effecting education, transport and storage and the voluntary sector)
- Only 13% of employers are planning making redundancies in the next quarter (lower than pre-pandemic level)
How Are Employers Reacting To This?
According to the same report, for the next quarter or so, employers are responding predominantly by upskilling staff (41%). For them, this is a way of ensuring that they fill the skill gaps that they are seeing in their business whilst also trying to keep their current employees engaged. They are also looking at how they are advertising vacancies. 35% of respondents are highlighting flexibility in their advertisements – reacting to the employees demand for greater control over their day. Finally, and most obviously, they are looking at increasing salaries (29%).
Whilst a number of these changes are obviously seen throughout every industry, what isn’t clear is the longer term response.
Some are saying that the effects will not be felt for the market for some time. As business leaders, we need to be prepared for the fall out whenever it happens.
Let us know your thoughts.
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