Recruitment and pay set to slow amid Brexit concerns, says CIPD

Employment growth is slowing and real wages are likely to fall next year, over concerns about the type of Brexit is being sought by the government, according to an industry body.

The labour market outlook from the Chartered Institute for Institute of Personnel Development and recruitment firm Adecco found that employers were concerned about access to labour while companies have lowered their investment intentions, with pay set to rise less than inflation in 2017.

The quarterly outlook found that the net employment balance, based on the difference between the share of employers expanding their workforce and the share of employers reducing their workforce, fell to +22 from the previous quarter’s +27.

While real wages are set to decline during next year as, for the second quarter running, employers are to make basic pay settlements of just 1.1% as inflation rises.

The report also said that 42% of employers thought that restrictions on EU labour could damage their UK business, while only 15% have started to prepare for a ‘hard Brexit - including a curb on immigration, no membership of the EU single market and adopting World Trade Organisation rules.

Only 6% of employers said they favoured a ‘hard Brexit’, 16% preferred existing trading arrangements, 26% were for a European Economic Area type arrangement including free movement of labour, while 10% preferred negotiated bilateral free trade arrangements.

“The impact of potential restrictions to migrant labour will certainly be exacerbated by the fall we’re seeing in business investment intentions,” Gerwyn Davies, labour market analyst at the CIPD, said.

“Given the current level of uncertainty and the projected increases in costs as a result of a weaker pound, it’s not surprising that employers aren’t currently persuaded to respond to likely controls on migration by investing more in skills. However, this will put further pressure on the UK’s productivity growth potential, which is critical to employers’ ability to afford more generous pay increases. Pay expectations are already weak, and as inflation moves up we can expect a period of low or negative real wage growth for the squeezed middle.”

He said that it was vital that the government considers making intermediate arrangements when introducing changes to immigration policy, which would ensure employers that, have come to depend on EU migrants, have time to review their recruitment and development strategies ahead of Brexit.

John L Marshall, chief executive of Adecco UK & Ireland, added: “For years, the UK has been one of the most attractive countries for EU workers, benefiting from easy access to a large, European talent pool. However, the Brexit vote is now seeing UK employers look increasingly concerned about their access to the single market.”