UK employment remains subdued despite signs of improvement in the business output. This is due to rising costs, a cautious outlook and firms’ struggles with rising costs.
According to the latest report from accountancy and business advice firm BDO, the Employment Index fell again in June – to 94.22 compared to 94.32 last May. This is near its lowest point since 2011. The services sector showed some positive signs, but job creation remained low as businesses reacted against rising costs, especially the increase in National Insurance Contributions introduced in April.
Optimism “well below” long-term averages
The labour demand weakened further in May. Payroll employment fell by 109,000, almost double the drop reported in April. It is possible that job losses will accelerate as firms delay their recruitment plans due to the squeezed margins.
The Optimism Index fell to 91.58, down from 92.30 the month before. The cost pressures are continuing to affect companies, and the possibility of additional tax increases this Autumn is also dampening the mood. Despite recent trade agreements between the US, EU, and India providing a small boost to manufacturing confidence the sector is still unstable and vulnerable to multiple challenges.
Scott Knight, BDO’s Head of Growth, noted that some sectors of the economy showed signs of resilience. He said that the services sector was largely responsible for the early signs of business output recovery.
Slower hiring and changing job market expectations
Tom Jewell is the VP of Customer Services at Zinc. He emphasized that there have been significant changes to recruitment strategies due to changing business requirements and the rise in generative AI tools. He warned that current hiring slowdown is changing what employers are looking for in candidates.
Jewell stated that “if organisations want to reduce new hires and maintain productivity, particularly in light of GenAI adoption they will need to rethink the qualities they look for in candidates.” As AI automates most administrative tasks many roles disappear or shift dramatically. This means that job criteria will need to evolve. “People-first abilities, adaptability and critical thinking, as well as problem-solving skills, will be more important than ever.”
Jewell said that the decline in recruitment was not only due to fewer job vacancies, but also because of increased competition and new expectations from employers. He also noted that job seekers are increasingly relying on AI tools, especially for creating applications and CVs. This raises concerns about hiring mismatches.
He said that the sharp decline in recruitment was not just due to fewer jobs but also because of tougher competition and changing expectations. We’re seeing more candidates relying on AI tools for help with writing applications, cover letter and CVs. While this can level the playing fields, it also increases the risk of mismatched hiring – that is, new starters getting roles they are not prepared to perform in.
