UK labour market hits two-year high as economy emerges from pandemic

UK labour market hits two-year high as economy emerges from pandemic

  • BDO’s Employment Index hits two-year high as final coronavirus restrictions are lifted
  • Easing of restrictions also provides a boost to business optimism in February, however the cost-of-living crisis looms large

The strength of the UK labour market has returned to pre-pandemic levels for the first time, according to the latest Business Trends report from accountancy and business advisory firm BDO LLP.

BDO’s Employment Index rose for a fourth consecutive month to 110.75 in February, representing a monthly gain of 0.77 points. This is the highest level the index has seen since February 2020, when it reached 112.86 ahead of the UK’s first coronavirus lockdown. The index now sits well above the 95 level which indicates growth.

The jump in the Employment Index has been driven by the lifting of covid restrictions and associated economic recovery. As businesses fully re-open and resume normal operations, they have been looking to hire more staff to cope with increased demand. A shortage of workers due to Brexit and the pandemic has also made competition for employees fierce. Together, these factors have placed upward pressure on employment figures, reflected in BDO’s Employment Index. 

The lifting of the remaining coronavirus restrictions has also led to a rise in BDO’s Optimism Index, which increased 0.9 points to 105.81 in February, marking a second consecutive month of improvement following December’s Omicron-related dip.

This rise was primarily driven by the BDO Services Optimism Index, which covers retail, hospitality and leisure among other industries. The index jumped by 0.94 points in February to reach 105.24 - its highest reading since July 2021 - reflecting the impact that remaining restrictions had on consumer-facing businesses.

However, this rise in optimism could be short lived. The impacts of Russia’s war on Ukraine are expected to weigh heavily on inflationary pressures, compounding existing concerns around the cost of living, which could see confidence decline in the coming months.

Commenting on the results, Kaley Crossthwaite, Partner at BDO LLP, said: “Propped up by the government’s furlough scheme, the UK jobs market was largely resilient throughout the pandemic. As we emerge from a series of lockdowns and return to normality, the jobs market is now moving from resilience to growth, reflected in February’s buoyant figures.

“While it’s promising to see growth in business optimism throughout February, this could be short lived as inflation continues to rise at a faster rate than wages. Inflationary pressures are set to mount further over the coming months, with energy and fuel prices key drivers of this increase.”


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.



February 2022 (Figures for this report)

January   2022

December 2021



BDO Output Index






BDO Optimism Index





BDO Inflation Index





BDO Employment Index






Note to editors

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Our clients are Britain’s economic engine – ambitious, entrepreneurially-spirited and high-growth businesses that fuel the economy. 

We share our clients’ ambitions and their entrepreneurial mind-set. We have the right combination of global reach, integrity and expertise to help them succeed. 


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Methodological Notes

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.


Tom Grant
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