Business confidence in the UK economy has fallen sharply in response to labour shortages, the Omicron variant and rising inflation.
According to the Recruitment & Employment Confederation (REC)’s latest JobsOutlook survey, there was a nine percentage points fall in confidence over the past three months leading to a -6 score – the first time the barometer has fallen into negative territory since February-April 2021.
Business confidence in making hiring and investment decisions dropped by two percentage points to net: +11, having exceeded +30 in May.
The REC said that demand for temporary staff was particularly strong as the economy became more shrouded in uncertainty, with a net score of +15. Temporary work, it said, was a valuable resource for both businesses and workers during uncertain times, helping to manage peaks and troughs in business demand and keep people in work.
Hiring intentions for permanent staff remained robust at net: +21, both in the short term and in the medium term.
The survey also found that in November, roughly one month after the end of the furlough scheme, most employers (51%) had seen no change in the availability of candidates for vacancies. However, slightly more employers (19%) experienced a reduction in the number of appropriate candidates than experienced an increase (12%).
For Kate Shoesmith, deputy CEO of the REC, the figures were “no surprise”. She emphasised that businesses needed certainty over any future restrictions.
She said: “Labour shortages and worries about rising inflation have been weighing on employers’ minds for a while now. With the Omicron variant added into that mix, it’s no surprise to see business confidence in the economy falling slightly. The good news is that firms remain confident in their own prospects as we head into the festive period, however.
“While the next few weeks are likely to be bumpy, we anticipate a highly competitive labour market in early 2022. There will be particularly high demand for temporary work, which helps businesses to manage uncertainty and keep people in work during tough times. Firms will have to look seriously at their recruitment process and their offer to candidates to attract the staff they need. Recruiters are ideally positioned to help with this.
“We don’t know how much Omicron will affect the jobs market yet. Government support schemes were successful at protecting jobs and businesses in 2020. The hospitality sector in particular is already being impacted at its busiest time of the year, so it’s good to see the Chancellor announcing support funds for the sector. Businesses now need certainty and clarity from government on any future restrictions so they can plan ahead. This would also help to reassure consumers.”
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