The outlook for UK employment has fallen for the second consecutive month after years of sustained growth, according to a new report from accountants and business advisors BDO LLP.
BDO’s Employment Index fell to 112.82 points in June, a decline of 2.29 points from January and the lowest it’s been in more than a year. The current economic slowdown is expected to halt gains in UK employment prospects, which had seen near uninterrupted growth since the global financial crisis until beginning to fall earlier this year.
BDO’s Employment Index combines a range of data examining forward-looking employment intentions, as well as the proportion of part-time or temporary workers in the UK labour market. Compounding this employment malaise has been a recent drop in the number of job vacancies, which is consistent with other survey data pointing to a softening in hiring plans. Weekly earnings growth has also fallen back, suggesting the demand for new employees has begun to recede.
Andrew Mair, Partner and Head of BDO LLP in the East Midlands, said: “The glory years of rising UK employment figures could be coming to an end. While the numbers remain in positive territory, growth is slowing. The labour market has been resilient to the potential effects of Brexit, but months of negative sentiment has finally taken its toll. Businesses’ hiring plans had remained buoyant in the face of uncertainty. But as confidence begins to turn, there’s no sugarcoating the fear that job prospects will take a hit.”
The findings are set against a gloomy economic backdrop. BDO’s report also found that UK manufacturing output has dropped sharply to 92.83, its lowest figure since December 2016, marking a fall into contraction territory. This dragged down BDO’s Output Index, which measures UK business output growth, to 97.24, its joint-lowest number since January.
Meanwhile manufacturing optimism, reflecting how businesses expect output to perform in the next three to six months, fell to 97.99, the lowest it’s been since January 2013. Firms using up Brexit stockpiles built earlier this year drove the output fall. The prospect of a no-deal exit from the European Union, as well as a weaker global economy, also loomed large.
Overall, the BDO Optimism Index remained steady in June, edging up by 0.01 points to 99.23. This was propped up by services optimism, which rose by 0.05 points to 99.39, the highest it’s been since January.
Andew Mair added: “While the trends are downward, it’s interesting to see that firms remain far more optimistic about the future than perhaps they ought to be, given declining order books. UK businesspeople clearly hope that the Brexit delay will be used wisely to get a deal. But the Tory leadership contest has reminded us all that no deal is a very real and frightening possibility. It would be no surprise if this damages confidence, leading to further curtailment of the investment and hiring plans of British businesses.”
To download BDO’s Business Trends New Economy report and find out more visit: www.neweconomy.bdo.co.uk.