Job creation continues but uncertainty climbs

Firms are on track to create more jobs, adding to the UK’s record labour market performance, according to the latest CBI/Pertemps Network Group Employment Trends Survey.

The annual survey – now in its twenty-first year, with 350 respondents employing around 1 million people – revealed that 45% of businesses across the UK expect to grow their workforce in the year ahead, with confidence highest among small and medium sized employers (46%). However, there is a Brexit drag weighing on larger firms, with optimism about adding new jobs at its weakest among businesses more exposed to the uncertainties posed by Brexit.

Confidence though is ebbing, with nearly half of UK businesses (48%) saying that the UK has become a less attractive place to invest and do business over the past five years.  Firms are still reporting access to skills as the most significant threat to the UK’s labour market competitiveness, with 83% stating it is a worry (up from 79% in 2017). With a new immigration system due to replace free movement of people when the UK leaves the EU, six in ten firms are concerned about access to enough labour (up from 49% in 2017) and three in five firms (59%) see the ability to move UK workers across the EU in future years as a threat.

Matthew Fell, CBI Chief UK Policy Director, said:

“Britain’s job market is in good health, but this survey also shows a worrying trend that there aren’t enough sufficiently skilled people to fill the number of job vacancies.

“It’s encouraging to see firms across the country investing in training their staff and helping them develop new skills. But this investment alone is not the silver bullet that will meet all our needs. Business and the Government need to plug the skills gap and champion the flexible labour market on which our economic strength relies, to ensure investment continues to flow in.

“Weak productivity is a significant challenge for the UK economy, and has a knock-on effect on living standards. While some firms are investing in new technologies to tackle this problem, many say stepping up their efforts to create a more diverse and inclusive workplace is an important part of becoming more productive – as well as being the right thing to do.

“To ensure the UK remains an attractive place for firms to invest and create jobs, it’s also critical a Brexit deal is secured quickly, otherwise the country risks sliding towards a national crisis. Politicians move on from the endless infighting of the past 30 months and come together to secure a workable Brexit deal.”

Carmen Watson, Chair of Pertemps, said:

“Employment is on the rise and optimism is high among employers. Businesses are remaining competitive but, against a continuing backdrop of skills shortages, what we are seeing is an increasingly employee-driven market. Candidates know their value and want to be rewarded with fair pay and benefits commensurate to their role. It’s encouraging, therefore, to witness organisations attracting and retaining talent through learning and development initiatives and increased engagement.

“Diversity remains on the agenda for UK businesses which, as a diversity advocate myself, I am delighted to see: organisations are waking up to the requirement of improving all spheres of diversity including gender and reducing pay gaps. Opportunities should be available to everyone and this will only strengthen the success of businesses moving forward.”

Firms are continuing to push for a diverse and inclusive workforce

Encouragingly, nearly nine in ten businesses (88%) see a diverse and inclusive workforce as important or vital to their future success. A majority have also reported they have taken action to increase workforce diversity, by improving progression opportunities (62%), training for line managers (55%) and introducing flexible working opportunities (54%).

The result for firms is an increased ability to attract and retain people (60%), an increase in skills and capabilities (50%) as well as increased levels of staff engagement (47%).

Nearly all firms are taking action to reduce the gender pay gap (93%) and improve gender diversity at all levels of businesses (50%).

Companies support introducing mandatory ethnicity pay gap reporting, but this survey finds that few (17%) are already well prepared to do so. Government must work with business and give a good implementation period to ensure that all companies are well prepared to report on time.

Matthew Fell, CBI Chief UK Policy Director, said:

“It’s positive to see more and more firms putting policies in place which help foster diversity and inclusion. Businesses are embracing the benefits of having an inclusive workplace, from an increased retention rate to better staff engagement, which in turn has led to better decision making.

“The first round of gender pay gap reporting was welcomed by the business community and they are taking steps to tackle the causes of the gap. We know that transparency can be a catalyst for ethnicity pay gap reporting in the same way it has been for gender, but reporting must be developed in a way that is supported by both businesses and employees.”

Pay growth is strengthening even in the face of pressures

More than two thirds of respondents (70%) to the survey aim to raise pay for their employees in line with, or above, inflation in the coming year (up from 52% in 2017).

Over half of businesses (57%) are impacted by the National Living Wage. Steps being taken by firms to cope with the associated costs range from investment in training to raise productivity (38%), absorbing part of the costs through reduced profits (35%) and raising prices (33%).

In the foreseeable future, more than a third of respondents affected are planning to offset costs by increasing productivity through greater training (34%) and investment in automation (37% - up from 25% in 2017), while others will look to raise prices (37%).

Matthew Fell, CBI Chief UK Policy Director, said:

“While pay growth has started to pick up, household budgets are still squeezed. It’s great to see many businesses aiming to improve pay levels over the coming year, but they face a range of challenges, including coping with the costs arising from the National Living Wage.

“We welcome the Government’s decision to consult on a new remit for the independent Low Pay Commission (LPC) beyond 2020. It’s important that both the National Minimum Wage and the National Living Wage increase at a pace that boosts living standards and protects jobs. More broadly, the focus should be on increasing productivity, which is the only sustainable way to accelerate wage increases.”

Other highlights from the survey include:

• For the sixth year running, the survey shows that growth in permanent recruitment will outpace temporary positions, four in ten respondents (42%) expect their recruitment to permanent jobs to increase in the next 12 months while just over one in ten (14%) expect to cut back on their permanent recruiting, this gives a balance of +28%.
• Firms are continuing to invest in their workforce to boost skills, with 87% upskilling employees in their current roles and 62% expecting to retrain workers
• Workforce engagement is at the top of the agenda for firms in the coming years (44%), along with retaining talent (43%), and improving leadership skills (35%)
• More than half (55%) of companies surveyed are investing in line managers, to train them in fostering inclusive and fair workplaces
• Almost three quarters of companies (74%) believe that the introduction of proportionate fees is necessary to make tribunals more effective. A fair and proportionate fees regime would prioritise effective dispute resolution rather than revenue raising, ensuring that it is not a barrier to justice.