The outlook for employment in the UK has fallen for the third consecutive month following half a decade of near sustained growth, according to a new report from accountants and business advisors BDO LLP.
BDO’s Employment Index, which combines forward-looking employment intentions as well as the proportion of part-time or temporary workers in the UK jobs market, fell to 112.76 points in July - the lowest level since May last year. The number of job vacancies in the UK has also fallen 4% since the start of the year as companies grapple with an increasingly sluggish economy.
The report further highlights the pressure of increasing wage growth on businesses. Average weekly earnings increased 3.4% in the three months to May - 0.2 percentage points higher than the three months to April. This growth, set against the backdrop of the negative economic outlook, has meant that companies are looking to save costs by cutting hiring, causing the jobs market to plateau.
Peter Hemington, Partner at BDO LLP, said: “This could be the beginning of the end of the strong employment market in the UK. It has remained one of the more resilient pillars of the UK economy, even in the face of Brexit, but the glory years appear to be over. Businesses are facing a conundrum of upwards pressure on wages even while the economy lags, so hiring plans are taking a hit.”
The negative outlook was reflected elsewhere in BDO’s Business Trends report. BDO’s Output Index fell by 0.25 points in July, reaching its lowest score since the same period last year. Manufacturing drove the decline, falling by 2.21 points as manufacturers use up stockpiles built up in the face of a no-deal Brexit.
Despite this doom and gloom, optimism in the manufacturing industry drove the Optimism Index slightly higher in July.
Peter Hemington added: “UK businesspeople remained surprisingly upbeat this month, even though economic indicators are by and large going the wrong way. Confidence drives employment and investment, so how it holds up over the next couple of months will be crucial to the UK staying in growth territory in the run up to Brexit.”
To download BDO’s Business Trends New Economy report and find out more visit www.neweconomy.bdo.co.uk
Overview of the BDO indices:
An overview of all four indices is provided in the table below, detailing figures for the last three months and the same month of the previous year, to allow for comparison. 100 = average value. Above 95 = positive.
(figures for this report)
(equivalent report last year)
|BDO Output Index
|BDO Optimism Index
|BDO Inflation Index
|BDO Employment Index
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The BDO global network provides business advisory services in 162 countries, with 80,000 people working out of 1,600 offices worldwide. It has revenues of $9bn.
The BDO Monthly Business Trends Indices are prepared on behalf of BDO LLP by the Centre for Economics and Business Research ltd., a leading independent economics consultancy. Cebr has particular strengths in all forms of macroeconomic and market forecasting for the UK and European economies and in the use of business survey techniques.
The indices are calculated by taking a weighted average of the results of the UK’s main business surveys. It incorporates the results of the quarterly CBI Industrial Trends Survey (and the CBI Monthly Trends Enquiry which is carried out in the intervening months); the Bank of England Agents’ summary of business conditions; and the Markit/CIPS Manufacturing and Services PMI data
Taken together the surveys cover over 4,000 different respondents from companies employing approximately five million employees. The respondents cover a range of different industries and a range of different business functions. Together they make up the most representative measure of business trends available.
The surveys are weighted together by a three-stage process. First, the results of each individual survey are correlated against the relevant economic cycles for manufacturing and services. This determines the extent of the correlations between each set of survey results and the relevant timing relationships. Then the surveys are weighted together based on their scaling, on the extent of these correlations and the timing of their relationships with the relevant reference cycles.
Finally, the weighted total is scaled into an index with 100 as the mean, the average of the past two cyclical peaks as 110 and the average of the past two cyclical troughs as 90.
The results can not only be used as indicators of turning points in the economy but also, because of their method of construction, be seen as leading indicators of the rates of inflation and growth.
at Headland on behalf of BDO LLP
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