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Uncertainty heightens as employers slow decisions on hiring

By Toyin Olasinde
23 August 2016   |   2:21 am
Business leaders have been urged to invest in skills to protect the future of their businesses, as some migrant workers may already be considering leaving the United Kingdom,

John L Marshall III

Business leaders have been urged to invest in skills to protect the future of their businesses, as some migrant workers may already be considering leaving the United Kingdom,

The latest survey by the Chartered Institute of Personnel and Development (CIPD), and Adecco Group UK & Ireland, the leading provider of workforce solutions, revealed that the proportion of employers expecting to increase staffing levels over the next three months dropped by four percentage points from 40 per cent pre-Brexit to 36 per cent following the decision.

As a result, the net employment balance, based on the difference between the share of employers expanding their workforce and the share of employers reducing their workforce, dropped from +21 pre-Brexit to +17 post-Brexit. However, the fall was significantly sharper among private sector employers, with the post-Brexit employment balance declining to +25 from +39 pre-Brexit.

The CIPD survey also indicated that 33 per cent of employers expect Brexit will have the effect of increasing their costs, compared with four per cent that think the opposite. One-in-five 21per cent employers expect to reduce investment in training and skills development and equipment as a result of Brexit, compared with seven per cent intending to increase investment in training and skills and five per cent planning to boost investment in equipment.

The Acting Chief Economist at the CIPD, Ian Brinkley, said: “There is clear evidence some employers have become more cautious about hiring following the vote to leave the EU. While many businesses are treating the immediate post-Brexit period as ‘business as usual’, and hiring intentions overall still remain positive, there are signs that some organisations, particularly in the private sector, are preparing to batten down the hatches.

“The softening of the British pound and the expectation of further weakness in the currency as we wait to see the terms of our exit from the EU has meant a third of employers expect their costs to increase over the next three months. In response, they’re looking to cut investment in crucial areas like skills development and equipment, but we think this reaction is premature.

“The economy had positive momentum going into the referendum and there is a risk that employers will create a self-fulfilling prophecy if they over-react in the expectation of a downturn. Instead of looking at cuts, now is the time to be talking about investment in people and in processes and equipment that will boost productivity and improve the resilience of businesses and our economy.”

Also speaking, the Chief Executive Officer of Adecco Group UK & Ireland, John L Marshall III, said: “While we have not yet experienced a significant effect on overall hiring since the referendum, it is clear that uncertainty around Brexit is making employers nervous. The survey indicates that employers have translated this into a wait-and-see approach. This caution seems sensible but unless employers want to see their growth stymied, they need to take proactive steps to future-proof their labour force. This means labour force planning and it means investment in training.

“Employers also need to start thinking about how they attract talent. Four in 10 companies think hiring EU migrants will be harder over the next 12 months as a result of Brexit. Organisations need to understand the make-up of their workforce, how restrictions on migrant talent may affect them, and where they are strong and weak on skills. The next step is thinking about how to get the right talent through your door.

“There is undoubtedly uncertainty but this is also a time of opportunity for organisations to get ahead. Whilst there’s no ‘one-size-fits-all’ approach for future-proofing against Brexit, there are steps that employers should consider. These include conducting a detailed audit of their workforce, mapping current and future skills gaps and investing in training and development.”

The CIPD/Adecco Group UK & Ireland Labour Market Outlook also considered the impact of the Brexit decision on the UK’s migrant workforce and how employers were likely to respond. Almost two in three 62 per cent employers said that they currently employ some EU migrants, but of those nearly a third 31 per cent were unable to say what percentage of their workforce is made up of EU migrant workers.

While most employers said it was too soon to say if their migrant workers were considering leaving as a result of Brexit, one in five employers 20 per cent thought that some of their migrant workforces were already considering leaving the UK over the next 12 months. Looking ahead, among employers that recruit migrant workers, two-fifths 40 per cent believe Brexit will make it harder for them to recruit EU migrants over the next twelve months, with just two per cent thinking it would be easier.

The Labour Market Outlook also explored how employers are responding to possible restrictions on migrant labour. Among employers taking or planning to take pro-active steps to reassure employees about the anxieties they may have as a result of Brexit, nearly one in five 17 per cent said they were giving some of their EU migrant workforce help with applications to become UK residents or citizens, with public sector organisations most likely to help their employees apply for citizenship 27 per cent.

Employers were also asked what information would be most helpful to their organisation regarding the implications of leaving the EU.