Recruiting intentions of firms take a tumble

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THE number of firms looking to recruit new staff has fallen to its lowest since 2010 as companies seek to squeeze more out of existing staff, a quarterly survey of personnel managers has revealed.

Weak productivity has been a problem for the British economy for years, and 2013’s rebound in growth failed to resolve it.

Instead, firms responded to strong economic expansion with more hiring, creating a record number of jobs but limiting pay rises.

The Chartered Institute for Personnel and Development said yesterday that this may start to change in 2014, with rates of hiring returning to more normal levels.

But it added that it would take longer before wages started to rise significantly.

Just 54 per cent of firms surveyed between December 12 and December 24 said they planned to recruit staff, down from 65 per cent in the previous quarter and the lowest proportion since the survey started in 2010.

“It is unsurprising that employment intentions are now dipping just as economic growth seems to be taking hold, with employers needing to tackle the major productivity hangover affecting the UK economy,” CIPD labour market adviser Gerwyn Davies said.

The net employment balance, or difference between the number of employers intending to increase staffing levels and those planning to decrease them, fell to +16 in the first quarter of 2014 from +24 in the three months before.

Improved productivity would be good news for the Bank of England, which was wrong-footed by the boom in hiring in 2013 that caused unemployment to tumble far faster than it forecast, hitting 7.1 per cent in the three months to November.

This forced the central bank last week to revise its six-month old forward guidance, shifting focus away from unemployment towards various measures of spare capacity when assessing monetary policy.

Jobs data for the fourth quarter due to be published tomorrow is expected to show the unemployment rate holding at 7.1 per cent, and the Bank forecasts it will decline to 6.6 per cent by the end of this year.

Wage growth was also expected to continue to lag inflation due to low productivity, according to the CIPD survey.

Nearly three quarters of employers said they would be awarding pay increases of 2 per cent or less in the twelve months to December 2014 versus current annual inflation of 2 per cent.

“Weak productivity partly explains why a majority of employers expect to continue awarding below inflation pay rises for their workforce,” Mr Davies added.

Intentions to hire were greater in the manufacturing and production sector than the services sector, providing some reassurance to those wanting to see a rebalancing of the economy away from consumer spending.

Yorkshire has a larger than average manufacturing sector.

Small-to-medium sized firms were also significantly more optimistic about employment prospects than large ones, the survey showed.