Companies remain optimistic about their ability to generate jobs in the short-term, building on the UK’s record labour market performance, according to the latest CBI/Pertemps Network Group Employment Trends Survey.
The annual survey – in its twentieth year, with 299 respondents employing around a million people – found that 51% of firms across the UK will grow their workforce in the year ahead, with confidence highest amongst small and mid-sized firms (58%). And 93% of respondents reported that a diverse and inclusive workforce is important to the future success of their organisation – up on 76% in 2016.
But the survey, carried out between August and October 2017, warns that delivering further jobs growth depends on businesses being confident they can remain competitive if they choose to base staff in the UK. Nearly two thirds (63%) currently believe that changes in the UK labour market will contribute to Britain becoming a less attractive place to invest and do business over the next five years – up from 50% last year and 25% in 2015.
Skills gaps were found to be the single most prominent worry facing firms, with nearly four in five (79%) respondents highlighting this as a worry – up from 64% in 2016. Access to overseas workers is a big contributor to this, with nearly half of respondents (49%) identifying uncertain access to labour supply – up from 35% in 2016 as a concern.
The CBI’s MD for People policy, Neil Carberry, said: “Britain’s record on job creation is second to none, and this year’s survey shows that this is set to continue in 2018. But with softening economic growth matched with high employment, the survey again emphasises the vital need to make progress on the Industrial Strategy and secure a good Brexit deal to improve productivity, support job creation and boost pay growth.
“The survey also shows that firms are concerned about finding the right staff in the future and this is damaging the outlook for investment in the longer term. It’s essential that businesses work to address skills gaps with colleges and other providers – but with high employment rates, domestic training alone can’t meet all our needs. Firms will need to be able to access people from outside the UK to support future growth and deliver the Industrial Strategy.
“With businesses already worried about future access to skills and labour, the worst thing we could do would be to undermine the many EU nationals already here and contributing to our businesses and public services. Last week’s Brexit deal is a good outcome if a final deal is reached, but the Government must be clear that the position of EU nationals already in the UK is secure in all scenarios.”
Tracy Evans, Pertemps Network Group HR and Quality Director, said: “Businesses have had an awful lot to deal with in 2017, from the Apprenticeship Levy to concerns over IR35, yet have still remained lively in the recruitment market with growth occurring in most sectors, as predicted this time last year.
“Although there has been a lot of change in 2017, confidence is high among employers, with most expecting to expand on opportunities in the coming year. One of the big problems we face in recruitment at the moment is the skills gap and how to overcome it. Finding the right staff is obviously key in recruitment and we need to find a solution to this ever-growing problem.”
The survey shows that companies continue to match inflation pay awards where they can. 52% of respondents aim to raise pay for their employees in line with (or above) inflation in the coming year, which is lower than the 57% that planned to do so in 2016. The drop is small, however, relative to the significantly higher rate of inflation that firms face – suggesting that predictions of a moderate increase in the average rate of nominal pay growth in 2018 are accurate.
An increasing proportion of firms surveyed are now affected by the National Living Wage (NLW) as the rate increases faster than average earnings. 55% are now affected, compared to 50% last year. Our survey shows that it is increasingly challenging for businesses, with 63% are needing to take action to cope with the costs so far, up from 59% last year. The most common actions taken range from raising prices (21%) and restructuring their business model (20%), to increasing investment in training (32%).
As the NLW increases in the years ahead, only 28% of affected businesses polled will be able to absorb the costs. A quarter of respondents affected are expecting to restructure their business models, which raises to 33% amongst mid-sized firms. While 30% intend to increase automation to raise productivity.
Matthew Percival, CBI Head of Employment policy, said:
“Living standards have been squeezed in 2017 because of higher inflation. The good news is that despite this, more than half of companies will offer real pay rises next year – despite a slowing economy. Higher productivity is the only sustainable way to increase pay, so it is rightly the focus of business and government through the Industrial Strategy.
“The CBI backs a rising minimum wage. But the path the National Living Wage takes over the next three years will require careful, independent monitoring and the Low Pay Commission must continue to ensure it reflects wider economic performance.”