Labour Market Outlook surveys

The Labour Market Outlook for the last quarter of 2018 is based on survey responses from 1,002 employers across the UK.

In addition to providing a general picture of market trends, the findings will also have important significance for employers and HR. The data and analysis shows sustained high employment and demand for skills and labour. This however, is compounding the pressure on recruitment, with employers reporting greater difficulty in hiring and the prevalence of hard-to-fill vacancies hitting a rising proportion of organisations.

Combined with a shock drop in the number of both EU and non-EU citizens in employment in the UK, the overall picture is one of reducing labour supply. The effect of this is leading to higher workloads for existing staff, problems meeting customer service objectives, loss of business and orders in many organisations. The impact on productivity growth, along with uncertainty over Brexit, is having a braking effect on wage growth despite rises for new starters and key staff.

All of this underscores the need for workforce planning and high performance working. Employers should also address staff concerns about job security and keep them informed on Brexit developments. Government meanwhile, must continue to work closely with employers in evolving a migration strategy that will allow access to skills at all levels. 

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Employment

The demand for labour in Q4 2018 will remain robust. This quarter’s net employment balance, or the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff is at +22. This is consistent with last quarter’s score and official labour market data, which shows that employment has increased in recent months.

Labour supply

The prevalence of hard-to-fill vacancies has edged further upwards since last quarter. Among employers who currently have vacancies, 70% report that at least some of their vacancies are proving hard-to-fill, higher than in Summer 2018 (66%) and Spring 2018 (61%).

Both recruitment and retention are proving a challenge within a tight labour market, with 44% saying it has become more difficult to fill vacancies and 34% finding difficulty in retaining staff over the past 12 months. Around half of all those facing recruitment or retention pressures have increased salaries as a response.

Impact of Brexit

Of the large proportion of employers who currently employ EU nationals, around half (48%) report an increase in their EU workforce expressing insecurity about their jobs as a result of Brexit. Interestingly, this insecurity was also shared by UK citizens at more than a quarter (26%) of organisations. Publication of the EU Settlement Scheme has gone some way to reassure EU workers, but only 28% of employers say it has helped their confidence in retaining EU nationals over the next two years.

Significantly, 90% of employers say the current migration proposals will not, or only to some degree, meet their needs for low or medium-skilled labour.

Wages

While nearly half of employers (49%) say a pay increase in on the cards, almost as many (41%) say it is too hard to tell or that they don’t know. However, the proportion of employers predicting a pay increase has risen since the last quarter.

In response to recruitment challenges, around half of organisations have raised starting salaries (48%). Among those who are also experiencing difficulties retaining staff, a similar proportion (51%) have increased salaries in some capacity. 

Despite these factors, there is no change to median pay rise expectations which remain at 2%. There was however, a surge in the public sector for which the median had risen from 1.5% to 2%. This is the highest expected pay settlement for the sector since tracking began in Spring 2012.