The Office for National Statistics (ONS) reported recently that the UK economy shrank more than expected in July but REC’s survey which covers June-August 2023 points to better underlying sentiment about the economy.
Firms continue to report improving confidence in making investment and hiring decisions for their own business. The rate of improvement dropped slightly by two points over the period June-August 2023 (to net: +5) – but is still on positive path. In line with ONS data, July was the weakest month of the quarter (-5, by comparison to a positive trend in June and August).
Employers remain concerned about the wider economy, but concerns are not now growing as quickly as earlier in the year. In June-August 2023, business confidence in the UK economy improved by three points to net: -38, from net: -41 in April-June 2023. This suggests more positive expectations for the economy for the rest of 2023, despite high inflation and labour and skills shortages.
There was little sign of this lack of confidence in the wider economy affecting hiring plans. With shortages still biting in many parts of the economy, employers’ forecast demand for permanent workers in the short term (next three months) and medium term (four to 12 months) remains unchanged at +18. In addition, the forecast demand for temporary workers also remains unchanged at +8. The medium-term temporary hiring trend, which had been negative in the previous quarter – rose eight percentage points to a net 0.
Neil Carberry, Chief Executive of the REC, said:
“Firms continue to feel better about themselves as the year moves on. As the business they are closest to is their own, it is no surprise that confidence picks up quicker when thinking about things that are close to home. Larger employers’ upbeat mood about hiring permanent staff is great because such firms tend to be early responders to developing trends, which we expect to see smaller firms pick up on later. Throughout this year, firms have leant on temporary work to navigate the slowdown – we will be watching for a switch back to permanent hiring as growth picks up. This survey suggests there is a chance of that this autumn.”
Neil Carberry added:
“Employers remain cautious about the wider economy, but they will have been cheered by dropping inflation and a pause in interest rate rises. What is needed now is some pro-growth passion from the politicians, setting out a longer-term growth strategy that delivers on infrastructure, skills, tax and mobility. Business can drive Britain’s prosperity – but we need our politicians to put the economy first.”