Rising costs, forthcoming legislation and global uncertainty has pushed employer confidence to a record low, a new CIPD report suggests.
The number of UK employers expecting to increase headcount in the next three months has fallen to a new low outside of the pandemic, said the CIPD, as they grappled with rising employment costs and growing global uncertainties.
The survey of 2,004 senior HR professionals, carried out between 24 March and 15 April, saw the overall net employment balance (NEB) – the difference between employers expecting an increase in staff levels and those expecting a decrease in the next three months – fall from +13 last quarter to +8 this quarter. This is the lowest point, outside of the pandemic, since the CIPD began collecting this measure in 2014.
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The figures don’t take into account the effect of the fall in the interest rate announced by the Bank of England or the trade deals with the US and India last week.
In the public sector, the net employment balance fell into negative territory, from +3 to -4, and has continued to fall in the private sector, from +16 to +11, which is a record low outside of 2020, when the pandemic began.
One in four employers (24%) told researchers they planned redundancies in the next three months. This was consistent with the previous quarter but higher than the 21% registered in autumn.
The retail and education sectors were facing the most pressure. The NEB for retail fell from +23 in autumn 2024 to -19 this quarter. Just one in 10 retail employers expected there would be an increase in staff levels in the next three months, with three in 10 expecting a fall in staffing levels.
The NEB was also in negative territory in education, at -13 among employers in compulsory education.
Overall, 61% of employers plan to recruit in the next three months, down from 64% in the previous quarter and 67% in autumn 2024.
Staffing levels
The fall in employers expecting to increase staffing levels in the next three months was driven by large private sector employers. Last quarter, 39% of private sector employers expected there would be an increase in their staffing levels but this has fallen to 32%.
The median expected basic pay increase remains at 3% and was now 3% across the public, private and voluntary sectors, found the CIPD.
Hard-to-fill vacancies were being felt across the economy but were highest in the public sector. Overall, 33% of employers had hard-to-fill vacancies, rising to 44% of public sector employers with the problem being particularly acute in education.
Where organisations were making difficult decisions about their workforce, the CIPD explored employers’ redundancy plans and payouts over the past 12 months. This revealed that a quarter of employers (27%) conducted a redundancy programme in the last 12 months.
Of those, half (50%) offered affected workers an enhanced redundancy package, going beyond what the law requires, while 41% offered the minimum statutory amount.
James Cockett, senior labour market economist at the CIPD, blamed the increases in employers’ national insurance contributions and the minimum wage for the lack of confidence, in addition to fears over the Employment Rights Bill now being debated in the House of Lords.
Cockett said: “The government can address employer nerves around the bill by prioritising an implementation plan with a clear phased timeline, alongside support and guidance for employers, and smaller businesses in particular.”
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