Talent needed to ride storm

Fears
of a recession and its effect on staffing levels mean HR professionals may need
to re-examine their retention policies. Karen Higginbottom reports

On
22 March, more than £52bn was wiped off share prices on the FTSE-100 index. It
is being called Black Thursday.

Corresponding
drops on Wall Street, coupled with the announcement of major job losses by
large firms, have contributed to gloomy economic forecasts.

The
share collapse was triggered by the news that US giant Procter & Gamble is
cutting 9,000 posts. It employs 6,000 staff in the UK.

The
list of companies making redundancies is growing. One of the UK’s biggest
engineering group Invensys announced it is shedding 2,000 more workers on top
of the previously announced 3,000 redundancies.

Furthermore,
US telecoms giant Motorola and Walt Disney are is cutting 4,000 jobs each.

Employers
are getting agitated over whether it signals the onset of a recession, and HR
professionals are wondering whether they should be drawing up contingency
plans.

John
Philpott, chief economist at the CIPD, explains that the likely effects are
that UK economic growth will slow but that worries about a recession are
unfounded.

He
said, “There will be no major impact on the UK economy but there will be a
knock-on effect on the new economy areas such as the dotcom sectors.”

Philpott
expects the labour market to remain tight for the foreseeable future. He said,
“There is likely to be levelling-off of the employment market, with falls in
unemployment and the rises in job vacancies grinding to a halt.”

The
effects of a levelling-off of the employment market means that HR professionals
will have to re-examine their retention policies, warned Philpott.

He
said, “Employers will have to make sure that they retain the best staff as
there will be an ongoing turnover of labour. The war for talent will intensify
as competition increases for better workers in certain sectors.”

One
effect of a tighter labour market will be the need for more sophisticated
reward packages in place in order to retain the more skilled employees.

Employers
will have to think about putting benefit packages in place that are
individually tailored to the employee, such as providing sports facilities and
offering flexible working practices, explained Philpott.

He
is not buying into the belief that a “sneeze” in the US necessarily results in
a “cold” in Europe.

“My
message to HR is not to panic. At the very worst the jobs market will stabilise
with a remote prospect of rising unemployment,” advised Philpott.

But
many companies are getting worried. Software company ICL believes that a
recession is in the offing in the UK.

A
company spokesman said, “Employers may have to cut back on recruitment to avoid
redundancies. Although there is a time lag from the US to Europe, the recession
is looming. The markets are overheated with dotcoms.”

Ian
Brinkley, senior economist for the TUC, disagrees. He believes that the US
stock market crash will have a limited impact. He is convinced that the labour
market will continue to be tight in the UK with recruitment and retention at
the forefront of employers’ agendas.

He
said, “The old ‘hire and fire’ economy has gone. Employers are looking outside
traditional areas of recruitment, such as the service-sector firms based in

London,
and going to the Home Counties to seek out labour.”

Another
symptom of the tight labour market is increased investment in employees,
according to Brinkley. He said, “Employers are now investing more money in
their employees, especially in the IT, business and public sectors.”

He
points outs that there is an economic pressure on employers to offer flexible
working practices to staff as more women with children are entering the labour
market.

Bruce
Warman, Vauxhall’s HR director, thinks the jury is still out on whether there
will be an economic downturn in the UK.

He
said, “Let’s not get carried away with the market volatility in the US. It’s
just a correction of high-tech stock prices.”

Warman’s
advice to HR directors is not to get carried away with the talk of a recession in
the UK. He thinks the news of an impending recession is premature considering
that the stock market started to recover after Black Thursday.

He
said, “My message is to be cautious and don’t do anything rash. Balance your
short-term decisions with your company’s long-term strategy.”

Manufacturers’
confidence undermined

Total
demand for manufactured goods fell again and output expectations for the coming
four months have weakened for the second consecutive month, according to the
CBI’s March survey of industrial trends.

Fifteen
per cent of manufacturers said total order books were above normal but 38 per
cent said they were below. The balance of -23 per cent compares with -16 in
February and is the most negative figure reported since July 1999.

Export
order books are still well below normal. The balance figure of  -24 is the same as that reported in the
February survey. 

Falling
total demand is reflected in output expectations. Over the next four months
output is expected to be little changed. While 26 per cent of people said
volume of output will increase, 23 per cent said it will fall giving a balance
of +3, the weakest figure since November 2000.

Stocks
of finished goods have stayed broadly stable over the past month. The balance
of +20 per cent of firms reporting more than adequate costs compares with +19
last month, but they stay at their highest level since March 1999 and above the
long-term average.

CBI
chief economist Kate Barker said, “This survey is further evidence that the
troubles of the UK’s manufacturing sector are far from over. The US slowdown
may have a more serious impact on the UK than first predicted. Higher stock
levels and falling demand are already causing companies to rein back their
output plans.”

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