Lockdown roadmap helps confidence return to labour market

Confidence in the UK labour market has grown as businesses see the beginning of the end of the pandemic.

A report conducted by the Chartered Institute of Personnel and Development (CIPD) has found a net positive rating in hiring intention, the first time since the pandemic began.

Overall, 56 percent of employers indicated they are looking to hire in Q1 of 2021.

The results were consistent with expectations, says Gerwyn Davies, senior labour market analyst at CIPD.

“Compared to the last quarter, we do have a Brexit trade agreement. The end of last year, there was a threat of a no-deal Brexit. We’ve also seen more employer optimism about the future prospects of the UK economy with a successful vaccination rollout.”

Labour market statistics from the Office of National Statistics paint a similar picture, with modest improvement in employment over the last two months. January saw 83,000 more people on payroll compared to a month prior.

“There’s certainly a very large element of companies out there who are recruiting,” says Jonathan Richard, CEO of Breathe, an HR software company. “I was with a group of small business owners just last week and well over half the firms were in recruiting and recruiting hard.”

As economic activity picks up, there may be a skills shortage in the second half of the year, with the UK no longer able to tap into the EU labour market as easily.

“Employers really need to start looking now at their workforce planning strategy, identifying where EU nationals were, and are, in their organisation and finding ways of addressing it,” says Davies. “They won’t be able to recruit them as easily, if at all, in the case of low skilled and unskilled workers due to the introduction of migration restrictions.”

In response to the end of free movement between the UK and EU, the UK government has lowered requirements and costs for sponsoring skilled foreign workers.

With the continued rollout of the vaccine and coronavirus case numbers drop, labour market optimism is expected to continue to rise says Davies.

“Our expectation is that things will continue to improve as we go through the year. We can expect to see more young people be hired. In terms of the unemployment rate, we certainly remain on the more optimistic side of expectations.”

However, the growing confidence in the labour market is not even across all sectors. Healthcare and ICT see the highest levels of confidence with a net employment intentions rating of +40 and +30 respectively, according to the CIPD report.

Meanwhile in hospitality, a sector that continues to be affected by social distancing measures, hiring intentions remains low, with it recording a rating of -6. In addition, one in five firms still plan on making redundancies this quarter.

“There’s clearly a world of pain in retail and hospitality. It is really a tale of two halves,” says Richards.

The CIPD survey’s net employment intentions figure, measures the difference between the proportion of employers expecting to add jobs and those planning to cut positions.

Furlough and the Budget

There is pressure on the UK Chancellor to once again extend the furlough scheme beyond March 31, during this week’s Budget announcement.

“We’d like furlough to be extended to end of June at the earliest, in line with the roadmap that was set up by the government,” says Davies. “[The government should] continue to support businesses where they’ve effectively prevented them from doing business.”

Since October, businesses who have placed staff on furlough have been paying 20 percent of employee wages along with National Insurance and pension contributions. Richards believes this is strong signal that employers are committed to rehiring furloughed workers.

“If a company has people on furlough, generally speaking, they really are on furlough. They are not just hanging in there to give somebody a bit more salary.”

As part of the budget, the CIPD hopes that the current apprenticeship levy is expanded further to become a “training levy”.

“We would like to see the apprenticeship levy broadened into a training levy so that organisations can fund their training activity in a way that they see fit for their organisation rather than having to be forced to spend it on apprenticeships,” Davies says.

“The [current] policy prevents organisations from sending their employees onto courses which can addresses the skills gaps in their organisations in a cost effective and relatively rapid way.”

The skill shortage may also be further complicated by the lack of clarity on the future of the workplace.

As companies debate whether remote working will be part of their working model, Richards says businesses need to take a firm stance to stay competitive in a tighter labour market.

“It’s going to be important for companies to take a stand. ‘We’re an office-based company because office culture is important for us. Or we have a culture that works remotely, therefore, we want people to work remotely’. You can’t be half and half on it.”