EMPLOYERS SLOW DECISIONS ON HIRING AND INVESTMENT IN WAKE OF BREXIT DECISION
Business leaders urged to invest in skills now to future-proof their businesses as evidence from employers shows some migrant workers may already be considering leaving the UK.
The UK’s decision to leave the European Union has resulted in a softening in employers’ hiring intentions, according to the latest CIPD/Adecco Group UK & Ireland Labour Market Outlook. This unique data is based on UK employer sentiment in the two weeks before and two weeks after the EU Referendum and shows that employers surveyed ahead of the EU Referendum were somewhat more optimistic about hiring intentions than those surveyed afterwards.
The survey comes from the CIPD, the professional body for HR and people development, and Adecco Group UK & Ireland, the leading provider of workforce solutions. It finds that the proportion of employers expecting to increase staffing levels over the next three months dropped by 4 percentage points from 40% pre-Brexit to 36% following the decision.
As a result, the net employment balance, based on the difference between the share of employers expanding their workforce and the share of employers reducing their workforce, dropped from +21 pre-Brexit to +17 post-Brexit. However, the fall was significantly sharper among private sector employers, with the post-Brexit employment balance declining to +25 from +39 pre-Brexit.
The survey looks at forward-looking intentions. It finds that many employers expect Brexit to have a significant negative impact on costs and business investment decisions:
• 33% of employers expect Brexit will have the effect of increasing their costs, compared with 4% that think the opposite
• One-in-five (21%) employers expect to reduce investment in training and skills development and equipment as a result of Brexit, compared with 7% intending to increase investment in training and skills and 5% planning to boost investment in equipment.
Ian Brinkley, Acting Chief Economist at the CIPD, said: “There is clear evidence some employers have become more cautious about hiring following the vote to leave the EU. While many businesses are treating the immediate post-Brexit period as ‘business as usual’, and hiring intentions overall still remain positive, there are signs that some organisations, particularly in the private sector, are preparing to batten down the hatches. The softening of the British pound and the expectation of further weakness in the currency as we wait to see the terms of our exit from the EU has meant a third of employers expect their costs to increase over the next three months. In response, they’re looking to cut investment in crucial areas like skills development and equipment, but we think this reaction is premature.
“The economy had positive momentum going into the referendum and there is a risk that employers will create a self-fulfilling prophecy if they over-react in the expectation of a downturn. Instead of looking at cuts, now is the time to be talking about investment in people and in processes and equipment that will boost productivity and improve the resilience of businesses and our economy.”
Commenting on the research from a recruitment point of view, John L Marshall III, CEO of Adecco Group UK & Ireland, said: “While we have not yet experienced a significant effect on overall hiring since the referendum, it is clear that uncertainty around Brexit is making employers nervous. The survey indicates that employers have translated this into a wait-and-see approach. This caution seems sensible but unless employers want to see their growth stymied, they need to take proactive steps to future-proof their labour force. This means labour force planning and it means investment in training.
“Employers also need to start thinking about how they attract talent. Four in ten companies think hiring EU migrants will be harder over the next 12 months as a result of Brexit. Organisations need to understand the make-up of their workforce, how restrictions on migrant talent may affect them, and where they are strong and weak on skills. The next step is thinking about how to get the right talent through your door.
“There is undoubtedly uncertainty but this is also a time of opportunity for organisations to get ahead. Whilst there’s no ‘one-size-fits-all’ approach for future-proofing against Brexit, there are steps that employers should consider. These include conducting a detailed audit of their workforce, mapping current and future skills gaps and investing in training and development.”
The CIPD/Adecco Group UK & Ireland Labour Market Outlook also considered the impact of the Brexit decision on the UK’s migrant workforce and how employers were likely to respond. Almost two in three (62%) employers said that they currently employ some EU migrants, but of those nearly a third (31%) were unable to say what percentage of their workforce is made up of EU migrant workers.
While most employers said that it was too soon to say if their migrant workers were considering leaving as a result of Brexit, one in five employers (20%) thought that some of their migrant workforce were already considering leaving the UK over the next 12 months. Looking ahead, among employers that recruit migrant workers, two-fifths (40%) believe Brexit will make it harder for them to recruit EU migrants over the next twelve months, with just 2% thinking it would be easier.
The Labour Market Outlook also explored how employers are responding to possible restrictions on migrant labour. Among employers taking or planning to take pro-active steps to reassure employees about the anxieties they may have as a result of Brexit, nearly one in five (17%) said they were giving some of their EU migrant workforce help with applications to become UK residents or citizens, with public sector organisations most likely to help their employees apply for citizenship (27%).*
Employers were also asked what information would be most helpful to their organisation regarding the implications of leaving the EU. Roughly two in five most wanted information around employment law and regulations (45%) or areas such as working time or the employment of agency workers (41%). Around 30% identified access to the single market and migration policy as a key area, with the public sector (39%) highlighting migration policy as a particular concern in comparison to private sector companies. Relatively few organisations (10%) were concerned with moving workers within organisations across national boundaries.
Brinkley added: “Employers are rightly thinking about the impact that the EU Referendum decision will have on their migrant workers and how they can best support their workforce. However, it’s likely that we won’t have a full understanding of what the implications are and when they will happen for some time. To prepare for any changes, it’s vital that businesses don’t put the brakes on investing in their people or taking steps to raise productivity. This is the exact opposite of what will be required if we face a reduction in the future supply of skilled labour from outside the UK.”