Almost half of firms in the UK plan to reduce recruitment or not recruit at all over the next year, according to an annual survey undertaken by the CBI.
The survey, which polled almost 250 firms, revealed a two-speed jobs market emerging with 51% of firms expecting to maintain or increase their permanent recruitment in the next 12 months and 46% planning to either reduce permanent recruitment or not recruit at all. This balance of +5% compares to a balance of +56% in last year’s survey.
For the first time, the CBI asked businesses to convey their approach to recruitment of entry level jobs: 47% plan to maintain or increase recruitment, compared to 45% of respondents who expect to reduce recruitment or stop hiring altogether.
A balance of +7% of respondents expect that their workforce will be larger in 12 months’ time, compared to a balance of +28% in last year’s survey.
42% of respondents expect to take steps to support young people in the year ahead, with one quarter of businesses (26%) maintaining or increasing the number of apprenticeships for young people and over one in ten (15%) creating more traineeships. One in ten firms (10%) intend to use the Kickstart Scheme to create additional jobs for young people.
Looking ahead, nearly half of respondents (48%) say they are exploring business transformation and restructuring plans as a priority.
“The UK labour market has been under heavy stress since the outset of the COVID-19 crisis and, although the economy has started to re-open, pressure on firms remains acute. With ongoing social distancing, higher costs, lower demand, local lockdowns and fears of a second wave, firms are tempering their recruitment plans,” said Matthew Fell, CBI Chief UK Policy Director.
“Businesses are focusing on bolstering their efforts to protects jobs and livelihoods, from cutting hours and reducing bonuses to restructuring. But continued cost pressure, unpredictable demand and uncertainty around Brexit negotiations are making trading conditions tough.
“We are seeing a two-speed recovery. While some firms are already looking at creating new jobs, most others are in survival mode. Young people are facing one of the most difficult jobs market in decades and supporting them through this difficult time and ensuring they have access to opportunities will be crucial. It’s encouraging to see one in ten firms looking to use the Kickstart Scheme.
“The Government support schemes have been lifesaving for businesses, but firms have reached a fork in the road. With many of those schemes set to unwind in the coming months, companies will be forced to follow-though on redundancy plans, which will be particularly devastating for those hard-hit sectors like aviation, hospitality and leisure.
“As the Job Retention Scheme unwinds, it’s crucial another lifeline is found. A new short-time working scheme should be open to all businesses who might be struggling now, but who have a sustainable future after this crisis.”
The threat of freezing pay
In light of the pandemic, half of respondents said that they have taken steps to protect jobs. Within this group, nearly half of them have reduced working hours (46%) while more than two in five (43%) have reduced bonuses. One quarter of them have reduced overtime and pay premiums (26%).
Firms are taking a cautious approach on pay in an attempt to preserve jobs. Asked what approach they expect to take at their next pay round, a third (33%) of respondents plan to implement a pay-freeze across all roles (up from 5% in 2019).
Meanwhile, 8% plan above inflation increases and three in ten (29%) aim to raise pay for their employees in line with inflation (down from 14% and 54% in 2019)3.
In response to the rising National Living Wage, more than one in three respondent businesses (34%) affected by the minimum wage think that the LPC should take a cautious approach, with larger firms (40%) more cautious than SMEs (32%). While nearly one in three respondent businesses (27%) have asked for a freeze for the 2021 rate.
“Businesses are considering a range of alternatives to ensure that redundancies are an absolute last resort, and it’s right that they discuss these options with workers. Through these difficult consultations they are seeking the right balance between pay restraint and job losses,” said Mr Fell.
“Firms are urging the Low Pay Commission to be cautious in order to help keep more people in work. Businesses believe that the emergency brake on the National Living Wage needs to be pulled to protect jobs in the short-term, whilst maintaining the ambition to reach its target as soon as possible.”