The underlying strengths of the UK’s labour market will see jobs growth continue into 2017, according to the latest CBI/Pertemps Network Group Employment Trends Survey.

The annual survey – in its nineteenth year, with 353 respondents employing nearly 1.2 million people – found that four in ten (41%) firms across the UK will grow their workforce in the year ahead.  For the fourth year running, the survey shows that growth in permanent job opportunities will outstrip temporary recruitment.

The survey, carried out between August and October 2016, found that while the pace has slowed by comparison to last year’s survey, the positive balance of firms expecting to add employees over those expecting to shed jobs stands at +28%.  This continues the optimistic trend we have seen every year since 2011.

However, uncertainty about the UK’s future relationship with the EU has shaken overall business confidence in the labour market. Overall, the balance of respondents expecting the UK to be a more attractive place to employ people in the next five years has flipped from +16% in our 2015 survey to -21% in the year’s results.

Josh Hardie, CBI Deputy-Director General, said: “With record employment levels, more people than ever are now in work and the strengths of the UK labour market look set to yield positive results over the course of 2017.

“Businesses are 100% committed to making the best of Brexit. However, this year’s survey does show a greater sense of concern about the UK’s long-term attractiveness as a place to create jobs. Getting our industrial strategy right and understanding what the UK’s future relationship with the EU will be, will help ensure that this worry does not negatively impact the future performance of the labour market.

“The Government should build on the positive moves it has already made to dispel uncertainty by drawing up plans for a smooth transition, giving firms both the time to adapt to new regulations and the confidence to invest beyond 2019.”

Carmen Watson, Chair of Pertemps Network Group, said: “2016 may have been a year of uncertainty for businesses but what we are seeing, looking ahead to 2017, is renewed optimism with employers continuing to invest in their workforces leading to jobs growth across the UK.

“It appears also from the survey that the majority of businesses are now working hard to push diversity and inclusivity to the fore as it is proven to bring benefits including increased talent and improved attraction and retention levels. However, skills gaps remain a concern for employers as having the right people with the right skills is crucial for any organisation’s performance.”

Firms are working hard to increase pay, with almost 6 in 10 companies (57%) able to do so in line with, or above RPI inflation next year. The initial rate of the National Living Wage this year has been testing for some companies with half of respondents reported they were impacted (50%). In response to the uplift in pay, 41% absorbed the cost within their profit margins, while 26% passed on the additional cost through increased prices to customers or suppliers.

Looking ahead to 2020, the ability of firms to cope by squeezing profits is likely to be reduced. A slightly higher proportion of affected firms anticipate passing on costs (28%) over the next four years, while the same proportion expect to increase automation to boost productivity and offset the cost of rising wages.  Nearly a fifth (18%) report they will look to reduce employment or restructure their business model to manage the scheduled increases.

Josh Hardie, CBI Deputy-Director General, said: “Companies are committed to raising prosperity and living standards across every corner of the UK – but for wage increases to be sustainable they must go hand-in-hand with productivity growth.

“The CBI backs a rising minimum wage. But the path the National Living Wage takes over the next four years will require careful, independent monitoring and the Low Pay Commission must continue to ensure it reflects wider economic performance.”

Business confidence is the foundation on which future investment, innovation and job generation is built. But companies are concerned about the availability of people with the right skills now and that this will persist for the long-term. Ongoing skills gaps ranked as the most commonly cited threat to competitiveness (64%) and for a second year topped the list of worries for the future (58%).

With apprenticeship levy implementation starting next year, businesses have reaffirmed their long standing commitment to skills and training. A balance of +26% of firms plan to expand their apprentice recruitment numbers next year, slightly up on last year’s findings (+19%).

While worries continue to grow about future access to skilled migrants as a threat to competitiveness (58%), up from 31% in 2015, almost as many of this year’s respondents (50%) were concerned about access to non-graduate migrants needed to fill labour shortages in key sectors.

Josh Hardie, CBI Deputy-Director General, said: “Businesses need the confidence they can employ the right people at the right time. They will continue to invest heavily in skills and training, working with the Government to grow the skills base needed for a thriving economy.  But having an immigration system that provides access to both skills and labour, whilst addressing the public’s concerns is essential.

“As we enter a new phase of UK-EU relations, it is imperative that employers are supported effectively so our labour market continues to perform.  There is a clear opportunity for the Government to work in partnership with business to position the UK as an attractive global hub and strong economy.”

Businesses are creating agile and inclusive workplaces that support economic prosperity across the whole of the UK.  Over three quarters (76%) of respondents reported that a diverse and inclusive workforce is vital or important to the future success of their organisation. They report a range of benefits of inclusive workplace practices including increased skills (73%), attraction and retention of staff (60%) and engagement levels (46%).

The vast majority of companies (77%) have taken steps over the past 5 years to build more inclusive workplace, including action on flexible working opportunities (60%), training for line management (57%) and improving progression opportunities for staff (56%).

But challenges remain for many businesses (67%) with obstacles such as workplace culture and the mind-set of management yet to be overcome in introducing more inclusive workplace practices.

Neil Carberry, CBI Director for People and Skills policy, said: “Inclusion is at the heart of boosting productivity because it helps ensure firms hire from a broad talent pool, and then help people give their best every day. Well-managed, engaged and supported staff are the key to boosting productivity, while boosting diversity often leads to better decision-making.

“Ultimately, companies that place inclusion and staff engagement at their heart are more productive and better able to secure the skills they need and hold on to them. These firms use effective management to tackle the barriers of corporate culture that the survey identifies.

“That’s why many firms don’t only see it as the right thing to do, they are already leading from the front with their great stories of what action they are doing across the UK.”

Other highlights from the survey include:

  • 33% of survey respondents expect to create permanent positions, while 14% expect lower, giving a balance of +19%.
  • 14% of companies expect to create temporary roles, while 12% expect a reduction in roles, giving a balance of balance, +2%
  • 30% of firms expect to create apprenticeship positions, while 4% expect lower levels of recruitment, giving a balance of +26%
  • 20% expect to expand graduate roles, with 4% plan to see fewer roles, giving a balance of +16% – the same balance as 2015
  • The majority of firms (77%) report positive employee relations and a similar proportion (76%) anticipate this continuing into 2017
  • Businesses are aware of the value of employee engagement, pointing to benefits including improved productivity and performance (73%), increased customer and client satisfaction (57%) and improved employee retention (44%)
  • In the coming year, the top workforce priorities for businesses are achieving and maintaining high levels of employee engagement (48%), retaining talent (41%) and improving leadership skills (37%)
  • Survey respondents emphasised that the future migration system must be responsive to economic need (45%) and provide access to both labour (46%) and skills (40%).

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