Brexit: Employers' confidence in UK economy slumps, raising 'red flag' for government

New survey points to an impending skills shortage with 40 per cent of firms stating that they have no spare capacity and would need to recruit in order to meet any additional demand

Workers on a building site (PA)

Employers’ confidence in the UK economy has slumped, raising a “red flag” for the Government as it conducts Brexit negotiations, according to the Recruitment & Employment Confederation.

In its latest survey, the industry body found that 31 per cent of employers now expect the economy to worsen and just 28 per cent expect it to improve. The net balance of -3 per cent was down from +6 last month.

Despite this, employers are still looking to hire, with one in five planning to take on more permanent staff in the next three months, the REC found.

The survey, which was conducted between 26 April and 10 July, found confidence in making hiring and investment decisions fell to it’s lowest level since just after the Brexit vote.

Consumers are also becoming more pessimistic, according to GfK’s latest index, which slipped to a post-Brexit low of -12.

The REC survey pointed to an impending skills shortage, with 40 per cent of employers stating that they have no spare capacity and would need to recruit in order to meet any additional demand. Construction firms, which are particularly reliant on EU workers, were the most likely to report a lack of appropriate candidates.

REC chief executive Kevin Green said the jobs market was still performing well but said the drop in confidence should raise a “red flag” and spur the Government to clarify its approach to Brexit.

“Businesses are continuing to hire to meet demand, but issues like access to labour, Brexit negotiations and political uncertainty are creating nervousness,” he added.

David Willett, director at the Open University, warned of a "chronic skills shortage" faced by UK firms which has been exacerbated by the uncertainties surrounding Brexit.

“Many organisations report that the situation is deteriorating, with a shortfall in the skills required to develop the agility needed to embrace and adapt to changes in a shifting political, technological and economic climate," he said.