CIPD Labour Market Outlook points to jobs gloom on the horizon

The latest quarterly Labour Market Outlook from the Chartered Institute of Personnel and Development (CIPD) reveals that UK employers have become much more pessimistic about employment prospects. Although the immediate jobs outlook remains bright, almost half of UK employers expect to employ fewer people this time next year.

The negative balance of employers expecting to employ more staff by spring 2006 over those expecting to employ fewer (-23%), is at odds with all four previous CIPD quarterly surveys which have all shown a positive balance of employers expecting to employ more staff over those expecting to employ fewer. The reversal is particularly marked in the public sector - where recruitment has been relatively buoyant in recent years.

John Philpott, the CIPDís Chief Economist comments, ìGiven the recent spate of job cut announcements and the pre-election emphasis on cutting public sector waste, it is perhaps not surprising that recruitment confidence has dropped. But with the labour-intensive, consumer services sector experiencing tougher times, and with public sector employers looking to make efficiency savings, the survey might be signalling more than an end of the jobs boom.î

The survey also reveals that short-term jobs market pressures remain, with UK organisations actively recruiting from all corners of the globe to fill skills shortages. More than a quarter of UK organisations plan to recruit migrant workers, with one in three public sector organisations intending to do so. UK organisations are recruiting migrant workers for their skills and experience and not for cost-cutting reasons. Employers appear particularly keen to recruit from the new EU accession countries, with around one in five UK organisations planning to do so. Meanwhile, as many as 14% of employers plan to recruit from outside the European Union and Commonwealth

Philpott comments, ìThe vast majority of UK organisations are recruiting migrant workers to obtain skills and experience in short supply, not to get staff on the cheap. Migration is helping to prevent wage inflation - as our survey finds most employers are expecting pay pressures to remain subdued. It is not however generally being used to cut pay rates. And with the Government likely to include an Immigration and Asylum Bill in tomorrowís Queenís Speech, ministers will also be encouraged by the survey finding that migrants are mainly filling skilled vacancies. This suggests that the proposed points system for non-EU migrants will help to better manage immigration flows without adversely affecting employers.î

Key findings:

Migrant workers

27% of UK employers plan to recruit migrant workers this Spring ñ the same number as the previous quarter.
18% of employers hire migrant workers because they are more committed to the role. However the main reasons for recruiting migrant workers lie with a short supply of candidates with the required experience (58%) and skills (56%).
Among those employers that recruit from overseas, 48% of employers hire migrant workers to fill professional vacancies while 19% recruit foreign workers to do manual jobs. A third of UK organisations say that the professional skills possessed by migrant workers cannot be found in the UK labour market.
Around 40% of UK organisations say that the standard of English attained by migrant workers is at best average. Approximately a third of UK organisations believe that a good standard of English is necessary to do the job they are hired to do.

Employment prospects and recruitment difficulties

45% of employers predict a fall in employee numbers in the next twelve months. There is a 23% negative balance of employers expecting to employ fewer staff by Spring 2006 over those expecting to employ more.

Short-term job prospects look far brighter however ñ around 4 in 10 UK organisations say that their employment levels will increase in the next quarter.

The number of employers reporting recruitment difficulties during the previous quarter has fallen from 55% to 47%. This is consistent with official Government statistics which show a recent fall in the number of unfilled vacancies.

The number of employers that have difficulties with recruiting professionals, the biggest recruitment concern among HR professionals, has grown from a third to almost a half during the past year. The number of organisations reporting difficulties with recruiting administrative staff and secretaries and senior managers has doubled - up to 14% and 16% respectively.

Lack of specialist skills required (58%) and lack of relevant experience (44%) were the main reasons for recruitment difficulties in winter 2004-05.

The number of organisations that employ workers on temporary contracts or fixed term contracts has shown a fifth consecutive quarterly increase. Only a quarter of employers hired workers on temporary or fixed term contracts this time last year - compared with the current figure of more than 4 in 10.

Pay

More than three quarters of employers expect their pay review to result in an average pay rise of between 2-4%. This is below the 4.5% rate consistent with the Monetary Policy Committeeís (MPC) 2% CPI inflation target.

Almost 10% of organisations say that directors will receive a salary increase of more than 5%, compared with an increase of 2% for skilled tradesman, manual workers and clerical staff.