Employers’ confidence in the UK economy declines as inflation reaches record highs

New data from the Recruitment and Employment Confederation (REC) JobsOutlook survey advises of a decrease in employers’ confidence in the UK economy during the first quarter of 2022 as inflation numbers reach their highest levels in 30 years.

Although the measure of business confidence increased slightly in January, it soon fell back to the same levels as those in the final quarter of 2021.

But despite the decreasing confidence, most employers are still positive about their ability to hire. The survey found that UK businesses’ confidence in hiring was at net: +8 (1% lower than in the last quarter of 2021).

According to the survey, employers’ intentions to hire permanent workers have significantly increased by 9% over the past three months, despite the negative economic outlook. However, these intentions may be due to the current challenges in filling vacancies.

More findings from the survey include:

• Medium-term hiring intentions rose by 7%
• Quarter-on quarter, hiring intentions for temporary agency workers remained positive even though the numbers declined by 14% in the short term and 8% in the medium term.
• In March, 18% of employers said that the increase in National Insurance contributions would reduce their ability to invest in their business.
• 15% of employers said that the National Insurance contributions would discourage the creation of new roles.

Neil Carberry, Chief Executive of the REC, commented: “Businesses are seeing tax rates and uncapped energy costs rise, as well as pressure on salaries from staff who are seeing their own bills go up. So it is no surprise that firms are more concerned about the outlook. But British firms are resilient and investment in staff and growth remain on the agenda when employers think about their own business. We expect to see employers’ hiring plans decouple further from their economic outlook over the coming months as they face a tight labour market. Firms will need to find new, creative ways to attract candidates, as well as keep hold of the talented staff they have. Recruiters will play a vital part in helping them to do so.

“More employers are switching their hiring intentions towards permanent staff, as the urgent need for contingency staff to cover Covid absences decreases. But temporary workers remain vital to managing uncertain and fast-changing markets.”

All indications are that resilient British companies remain intent on growing despite a negative economic outlook.