Private sector jobs growth continues but serious risks remain

Published on Monday, 14 November 2011 10:30
Posted by Scott Buckler

The tentative private sector jobs recovery is continuing, but firms are scaling back on temporary staff following the introduction of new agency workers rules, and serious risks to the employment outlook remain. That is according to a survey by the CBI and recruitment specialists Harvey Nash

Staying the Course, the CBI/Harvey Nash Employment Trends Survey, covers 462 UK companies, and was conducted between August and September 2011. The survey shows that jobs are being created across the private sector, led by small and medium-sized companies, but that pay restraint remains the norm, with nearly half of all firms planning a below-inflation pay award or targeted pay rises.

However, there is a marked difference between permanent and temporary recruitment with prospects for temps deteriorating significantly ahead of the October introduction of the Agency Workers Directive. The CBI is calling for a full review of the impact of this directive to strip out any Whitehall-inspired gold-plating to minimise the damage and retain as many job opportunities as possible.

Dr Neil Bentley, CBI Deputy Director-General, said:

"It is encouraging that firms right across the UK are growing their workforces, especially smaller companies.

"But employers are making hiring plans on shifting sands and there is a risk the tentative private sector jobs recovery could be blown off course by fast-moving economic events at home and abroad.

"We need to be doing all we can to get the UK working, so it is worrying that changes to rules around hiring agency workers are leading to fewer openings for temps.

"There needs to be an early review to minimise the damage this directive is causing and to ensure we retain as many job opportunities as possible.

"We've also set out some new proposals for boosting employment, including a Young Britain Credit to encourage more firms to hire unemployed young people."

Looking at the outlook for recruitment in more detail, the survey found that:


  • 47% of employers are predicting their workforces will be larger in a year and 19% predict they will be smaller, giving a balance of +28%. This rises to +35% in firms with fewer than 250 employees
  • Only 7% of firms are operating a recruitment freeze, compared with 61% during the depths of the recession in 2009
  • Ahead of the introduction of the Agency Workers Directive, just 16% of employers are planning an increase in the use of temps, and 20% a reduction, giving a balance of -4%
  • Prospects for graduates are slowly starting to improve, with a balance of +11% of firms planning to take on more university leavers in the next six months.

On pay,the survey shows that restraint remains essential in these challenging economic times, helping preserve jobs and keeping companies competitive. Among the findings are:

  • 67% of respondents are not planning to match or exceed inflation (RPI) at the next pay review
  • Where pay rises are planned nearly half (49%) of employers are opting for a general increase below the rate of inflation or targeted awards for some members of staff
  • 12% of all firms are planning a pay freeze at the next review, compared to 55% in 2009, and pay freezes are concentrated among those firms with fewer than 50 employees (33%).

Albert Ellis, CEO of Harvey Nash, commented:

"The UK jobs market is holding up, with robust demand for highly-skilled staff in professional services, science and IT, but there is a question mark about whether private sector recruitment can keep pace with public sector job losses.

"With the risk that economic conditions may well become more challenging, companies are understandably taking a cautious approach to pay for next year, particularly in small and medium-sized firms.

"When comparing the UK's labour market to mainland Europe, it remains relatively favourable, but the implementation of the Agency Workers Directive is further degrading Britain's standing as a business-friendly environment in which to invest."

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