Falling employer confidence has dented hiring intentions, with 32% of businesses planning to reduce headcount through redundancies or curbing recruitment
The last three months has seen a significant drop in hiring confidence with the likelihood of employers making staff redundant at the highest level in the last 10 years, outside of the pandemic, showed the latest quarterly survey of more than 2,000 UK employers by CIPD, the professional body for HR and people development.
The imminent hikes in employer National Insurance contributions (NICs) and the national minimum wage from April, announced in the Chancellor’s first Budget, have been a damaging blow to businesses of all sizes.
An overwhelming 90% of organisations expect employment costs to increase due to NICs changes with 43% expecting the NICs’ rise to hit their employment costs ‘to a large extent’.
The reduction in the secondary threshold for employer NI to £5,000 from the current £9,100 a year is a major concern for 40% of employers which expect the near halving of the rate from 6 April to increase their employment costs ‘to a large extent’.
Last quarter 11% of employers expected there to be a decrease in staff levels in the next three months, but this figure has now risen to 16%.
Despite claims by the government that the rise in business taxes would not hit ordinary workers, two in five (42%) companies are planning to increase prices in response to the higher employment costs.
A quarter (24%) have also cancelled or scaled down plans for investing in or expanding their business.
Peter Cheese, chief executive at the CIPD, said: ‘These are the most significant downward changes in employer sentiment we’ve seen in the last 10 years, outside of the pandemic.
‘Employer confidence has been impacted by planned changes to employment costs, and employment indicators are heading in the wrong direction. Businesses have had time to digest these impending changes, with many now planning to reduce headcount, raise prices and cut investment in workforce training.’
One in five (19%) plan to cut back on training expenditure, something which is evidenced to have positive productivity effects, particularly important in a time of skills shortages and to achieve the government’s plans for growth.
‘There are worrying signs some employers are shelving plans to hire new staff or train their people, or they expect to scale back plans to expand their businesses,’ warned Cheese.
‘If the government’s plans are to succeed, it’s vital they set out how they will help businesses to support growth and investment. And it’s important this support is felt across the economy.
‘This means fast-tracking consultation with employers on the design of the new Growth and Skills Levy and other changes to skills policy to help organisations upskill their workforces and to tackle technical skills shortages holding back the economy. It also means reviewing and improving support services available to smaller businesses in particular.’
The decline in the net employment balance also reflected employer concerns. This measures the difference between employers expecting an increase in staffing levels and those expecting a decrease in the next three months.
The CIPD index fell significantly from +24 to +16 across the private sector, with retail tanking from +23 to +1 in just three months, by far the worst affected area, while hospitality was also down from +18 to +7.
Perhaps of greatest concern was the reaction of the construction industry, recording +27, when it had been riding high at +43 just three months ago. This against a backdrop of the government’s large scale infrastructure plans for the UK.
But the employment picture is mixed, with a third of employers stating that they still have ‘hard to fill vacancies’. For example, the accountancy sector is struggling to find enough newly qualified accountants, while the situation is tough in education at 49% experience recruitment problems, and nearly as many at 46% across construction with a shortage of skilled workers.
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Peninsula Team, Peninsula Team
(Last updated )
Peninsula Team, Peninsula Team
(Last updated )
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