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Brexit, gig economy and pay will continue to define labour market in 2017

CIPD calls on UK Government to focus on workplace investment to boost economy

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CIPD

After a turbulent 2016, the next 12 months are set to prove even more challenging for the UK Government and businesses as the key issues of Brexit, the gig economy, pay and productivity will continue to dominate the labour market, according to the CIPD, the professional body for HR and people development.

In the CIPD’s annual labour market predictions, Ian Brinkley, acting chief economist, anticipates slower economic growth, a modest rise in unemployment, fewer new jobs and downward pressure on pay, as the UK continues to suffer from low productivity and continued uncertainty about its Brexit arrangement.

Commenting on 2016 Ian Brinkley said:  “The Brexit vote didn’t cause the economy to fall off a cliff edge in 2016, but there’s been a clear loss of confidence in international markets signalled by the fall in the pound and slowing inward investment. The single biggest thing that the Government could do to help in 2017 would be to give businesses greater certainty over the direction of travel, the residence status of migrants already in the country and the likely extent of restrictions on new flows of migrants. Very few employers want a ‘hard’ Brexit and the Government must consider this when planning its strategy for both the final arrangement and the transition towards it. We simply cannot afford for businesses to live in limbo.”

On the UK labour market:

Brinkley’s prognosis for UK labour market in 2017 is fairly bleak; with slower economic growth, increased unemployment, fewer new jobs and a lack of pay rises for most. Overall, employment stopped growing between May-October 2016 and this trend of very weak job growth is expected to continue into 2017. He also predicts a modest increase in unemployment with fewer new jobs – possibly as few as 100,000 – being created throughout the year. It’s also expected that 2017 could be the year when inward migration to the UK from the rest of the EU starts to move towards permanently lower levels. There was a sharp slowdown in inward migration between July-September according to the Office of National Statistics. The CIPD’s latest Labour Market Outlook (Nov 2016) also found that almost four-in-ten (38%) of employers think it will be harder to recruit EU workers in the year ahead and 28% have concerns that their current migrant workers may wish to leave the UK.

On pay:

Against a backdrop of anticipated higher inflation, real wages are set to fall in the next 12 months. Most employers are also likely to find that they are either unable to or don’t need to offer higher wages, making 2017 a year of no real terms pay rises for most people. The CIPD’s latest Labour Market Outlook (November 2016) saw employers expect median basic pay settlements of just 1.1% for the 12 months ahead.

On the gig economy and working practices:

By international standards, the UK has a high share of permanent work and a high share of good quality jobs, but 2016 was marred by stories of poor employment practices, particularly amongst certain high street retailers and employers engaged in the gig economy, with the use of agency workers and the employment status and rights of people involved in different forms of atypical working coming under the spotlight.

Brinkley comments: “While the gig economy works for many people we know that, for significant minorities, the experience of work is poor and getting worse. The publication of the independent review into employment practices led by Matthew Taylor next year will be the first real test of the new Government‘s appetite to regulate new forms of employment and ensure that flexible working works for all and that, where needed, employers make concessions on pay, hours and conditions. However, we expect the trend of flexible or ‘atypical’ employment practices – through agency work, zero hours and self-employment – to continue. How to manage, train and progress an increasingly arms-length part of the workforce will remain a major and growing challenge for organisations and the HR profession in particular.”

On productivity:

The CIPD welcomes the Government’s revamped productivity plan, backed by £23 billion of public investment, but calls for it to be more strongly focused on skills development in order to boost productivity.

Brinkley continues: “Once again in 2016, UK productivity has failed to turn a corner but we should expect a better year in 2017, thanks to investments announced in the Autumn Statement. The National Productivity Investment Fund is a step in the right direction but it contained no specific measures to boost workforce skills and development. At a time when the supply of migrant workers coming into the UK from the EU is likely to be restricted it’s a massive oversight to not take the necessary steps to invest in developing the skills of the UK workforce. This is a major omission, given the strong link between skills and productivity. Diverting just five per cent of the fund towards skills development would provide over £1 billion in additional investment over the next four years.

“Equally, the Government’s new industrial strategy for 2017 should focus much more strongly on the workplace and skills, with the single aim of improving productivity. 2017 provides a chance to break from the old narrow focus on a handful of high tech and export sectors that has achieved little to date. Our economy is broad; investment in productivity must be too.

“Until we crack the UK’s productivity problem, and find ways to sustain productivity growth, it’s unlikely that we will see any improvement to living standards for some time.”