Job prospects fall to new low amid national living wage uncertainty

The outlook for the UK jobs market has fallen to a three-year low, as employers try to mitigate costs ahead of the introduction of the national living wage, according to the latest quarterly Employment Outlook Survey by Manpower.

Based on responses from more than 2,100 employers, the seasonally adjusted net employment outlook has dropped two percentage points to +4%, after standing at +6% for the last three consecutive quarters.

James Hick, ManpowerGroup Solutions UK managing director, said: “The national living wage is sending shockwaves through the UK labour market… some employers are thinking twice about taking on new workers.”

The net employment outlook is calculated by subtracting those employers who plan to reduce staffing levels from those who plan to hire staff. A positive result indicates that more employers plan to increase rather than decrease staffing levels; a negative result suggests the opposite.

Manpower’s data shows that employers are already anticipating the extra costs associated with the introduction of the national living wage and many are intending to curtail their recruitment plans in the run up to Christmas.

The national living wage will start for those aged 25 and over next April at £7.20, rising to more than £9 per hour by 2020. The Office for Budget Responsibility has estimated it could also result in as many as 60,000 people losing their jobs.

Support services firm Interserve has announced that the extra annual wage bill for its 15,000 cleaners could amount to as much as £15 million, or 12% of its annual profits, according to Manpower.

Another consequence might be that employers try to bypass the new legislation completely: “We anticipate that some employers may look to mitigate the extra costs by taking on more younger or self-employed workers, who are not entitled to the national living wage.

“It could push a greater proportion of young people into low-skilled jobs, resulting in an influx of less experienced workers into social care and other sectors hardest hit by the new legislation,” says Hick.

More optimistic outlook for London

Thanks in part to the rise in technology and new opportunities in the creative sector, the outlook for London stands at +8%, twice the national average. This is despite the fact that finance and business services are only predicting +4%, the weakest recorded for three years.

Hick says: “It may be a surprise to see London thriving, given the relatively lacklustre performance in finance and business services, [but] new opportunities are being generated elsewhere in the capital in places like the old BBC Television Centre in White City which is to become a creative sector hub.”

But the North lags behind

In contrast, the outlook is not looking as rosy in the North of the country, with the North-East recording -2%, the North-West at 0% and Humberside at +3%.

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This marked difference could be attributed to the fact that one-fifth of workers in the North-East are employed in the public sector, which, amid continuing cuts, continues to be pessimistic about the future.

“There is a marked divide between job prospects in the North and those in London – a clear sign that the Government’s plans to rebalance the economy through the creation of a Northern Powerhouse have so far failed to ignite,” says Hick.