New data reveals employers requiring more support for investment in labor market
The most recent findings from the CIPD’s Labour Market Outlook, which is based on a survey involving over 2000 UK employers, indicate that numerous employers are reconsidering their plans to invest in their employees and expand their businesses. In response to this trend, the CIPD is advocating for the UK Government to expedite its business support and skills policy initiatives. To align with the government’s growth objectives, businesses, particularly small enterprises, require more specialized assistance to confidently strategize for the future and invest in the essential skills needed to enhance productivity.
A decrease in confidence among employers is evident from the survey results, with intentions to hire fewer employees and an increase in anticipated redundancies, reaching the highest level in ten years, excluding the COVID-19 period. The net employment balance from the survey, which represents the variance between employers expecting an increase and those expecting a decrease in staff within the next three months, dropped from +21 in the previous quarter to +13 in the current quarter. This decline was even more pronounced in retail, transport and storage, hospitality, and construction sectors. Employers attribute this substantial decline in confidence to the forthcoming increases in National Insurance Contributions (NICs) and the National Minimum Wage, declared in the October Budget.
The survey results indicate that 90% of businesses expect their employment costs to rise, with 32% intending to decrease their workforce through redundancies or by hiring fewer workers, 24% planning to scale down investment or expansion plans, and 19% preparing to cut back on training expenditure.
To facilitate successful growth plans, the UK Government must provide clarity on how they will aid businesses in managing these escalating costs. It is worrisome that a significant portion of employers (19% of those surveyed) plan to reduce their investment in skills development amidst widespread skills shortages. Research shows that training and development significantly enhance productivity, prompting a call for accelerated government discussions with employers regarding the new Growth and Skills Levy, coupled with policy revisions that encourage and enable workforce upskilling.
The Labour Market Outlook serves as a valuable tool for shaping conversations surrounding employment trends in the UK. The report is widely respected and frequently garners attention from major news outlets such as the BBC, Guardian, and Telegraph, offering valuable data, insights, and recommendations alongside influential business bodies like the Federation of Small Business (FSB) and British Chamber of Commerce (BCC), all highlighting the declining employer confidence.
In light of the increased employment costs, some employers are adopting forward-thinking strategies, with 37% focusing on enhancing efficiency and productivity, and 21% considering the integration of automation, including AI. The CIPD advises people professionals to refrain from immediate reactions and instead adopt a proactive, long-term approach to workforce planning by evaluating both current and future skills requirements. This presents a significant opportunity for HR, L&D and OD professionals to champion a people-centric business strategy that directly contributes to business success by prioritizing continuous learning, investing in developing the workforce, embracing technology for enhanced efficiency, and exploring alternative solutions to downsizing.
When considering pay intentions for the upcoming quarter, the median projected basic pay increase remains at 3%, while anticipated pay awards in the next 12 months continue to remain stable.
