Pay expectations weaken. Demand for labour remains robust.


The latest CIPD/The Adecco Group Labour Market Outlook survey findings reveal that employers anticipate subdued basic pay growth of just 1%. This, combined with rising inflation, is raising fears of a fall in living standards.

More than 1,000 employers’ median basic pay expectations to March 2018 has fallen to 1% from 1.5% just 3 months ago, the lowest in 3 ½ years. This is in line with recent Labour Market Outlook reports and official labour market data which have also pointed to a slowing down of the rate of basic pay growth.

Of those companies who plan to award a less than 2% pay rise, freeze or decrease pay, 21% say that rolling out the Government’s auto-enrolment scheme is a key factor preventing them from being more generous.

And while employees are facing a squeeze on their earnings, the survey finds that demand for labour continues to look robust into the 2nd quarter of 2017. The report’s net employment balance also remains positive even though it has moved down to +20 from +23, consistent with modest decline over the last 2 years.

Demand for labour is highest in manufacturing and production, where 56% of employers report facing difficulty in filling vacancies. In the public sector, the net employment balance is in negative figures as the number of employers who plan to reduce their workforce outweighs those who plan to increase it.

Overall, employers remain confident about growth, with the survey finding that 68% of organisations are planning to recruit employees in the next three months and 45% of vacancies in the manufacturing sector are for new roles.

However, 1 in 5 employers who are facing difficulty recruiting do not fund any training activity and a similar number have no measures in place to improve their talent pipeline.

Gerwyn Davies, CIPD Labour Market Adviser, says “The weak pay data is no surprise given the continued weak productivity growth in the UK. However, this is being exacerbated by many employers’ passive attitude towards workforce development and training, despite reporting hard-to-fill vacancies. At the same time, private sector employers are proving stubbornly unresponsive to labour market changes that should, in theory, act to increase wages, such as the number of unfilled vacancies. The data suggests that the introduction and increase of various labour costs, such as the government’s auto-enrolment scheme and the apprenticeship levy may be part of the explanation. It’s crucial therefore that we see a pick-up in employer investment in workforce skills development to support and sustain productivity growth.”

Alex Fleming, Managing Director, Adecco UK & Ireland, commented “Workforce planning continues to be vital as Brexit becomes a closer reality for the UK. Skills shortages continue to be evident in the UK labour market and employers need to be addressing this issue head-on with thorough planning. Interestingly, one in ten firms indicate that the UK’s decision to leave the European Union has made them consider relocating some or all of their business operations to outside of the UK. Amongst those who have considered relocating to outside of the UK, one-in-three don’t know which country they would relocate to or say it is too soon to say. UK employers need to take investment in skills and people seriously to protect the future of our economy.”

Monday, 15 May 2017

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Pay expectations weaken. Demand for labour remains robust.