Brexit latest: UK employment market 'skating on thin ice', says national employers survey

The survey asked around 2,100 UK employers whether they plan to hire more workers or reduce the size of their workforce in the last three months of this year

Zlata Rodionova

Tuesday 13 September 2016 10:29

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British employers are less optimistic about adding jobs following the UK’s vote to leave the EU, a survey has found.

The recruitment agency Manpower said the EU referendum result has failed to dampen companies’ immediate recruitment plans but jobs could become scarce in the future as the UK job market is “skating on ice”.

Employers in six out of nine sectors, including construction, financial services and utilities, have reported a fall in job optimism, according to a survey of 2,102 bosses.

The survey, conducted in the weeks following the EU referendum, asked whether companies plan to hire additional workers or cut the size of their workforce in the next three months.

Mark Cahill, managing director at ManpowerGroup UK, said the future of freedom of movement across the EU is of particular concern.

“After the initial shock of Brexit, we’re entering a new phase of prolonged economic uncertainty. As UK businesses are reliant on European talent to help fill the skills gap, we urge the government to prioritise maintaining the free movement of people across the EU during its negotiations,” he said.

“Many finance operations in the City of London depend on the EU ‘banking passport’ and the fall in hiring intentions could reflect pessimism over the future of this agreement. We’ve already seen London’s competitors like Paris and Frankfurt making overtures to the City’s big finance firms,” he added.

The UK claimant count unexpectedly declined in July, according to ONS figures, suggesting the British labour market held up reasonably well in the wake of the Brexit vote.

But economists warned the data may not reflect the full extent of any post-Brexit fall in hiring.

“July’s data were never likely to show a sharp deterioration, because the data were collated just three weeks after the vote and employment laws prevent firms from making workers immediately redundant” said Samuel Tombs of Pantheon.

Manpower’s survey follows a similar report by HR body CIPD and employment agency Adecco which found that the percentage of employers expecting to increase staff levels over the next three months dropped from 40 per cent before the Brexit vote to 36 per cent in July.

6 ways Britain leaving the EU will affect you

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1/66 ways Britain leaving the EU will affect you

6 ways Britain leaving the EU will affect you

More expensive foreign holidays

The first practical effect of a vote to Leave is that the pound will be worth less abroad, meaning foreign holidays will cost us more

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6 ways Britain leaving the EU will affect you

No immediate change in immigration status

The Prime Minister will have to address other immediate concerns. He is likely to reassure nationals of other EU countries living in the UK that their status is unchanged. That is what the Leave campaign has said, so, even after the Brexit negotiations are complete, those who are already in the UK would be allowed to stay

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6 ways Britain leaving the EU will affect you

Higher inflation

A lower pound means that imports would become more expensive. This is likely to mean the return of inflation – a phenomenon with which many of us are unfamiliar because prices have been stable for so long, rising at no more than about 2 per cent a year. The effect may probably not be particularly noticeable in the first few months. At first price rises would be confined to imported goods – food and clothes being the most obvious – but inflation has a tendency to spread and to gain its own momentum

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6 ways Britain leaving the EU will affect you

Interest rates might rise

The trouble with inflation is that the Bank of England has a legal obligation to keep it as close to 2 per cent a year as possible. If a fall in the pound threatens to push prices up faster than this, the Bank will raise interest rates. This acts against inflation in three ways. First, it makes the pound more attractive, because deposits in pounds will earn higher interest. Second, it reduces demand by putting up the cost of borrowing, and especially by taking larger mortgage payments out of the economy. Third, it makes it more expensive for businesses to borrow to expand output

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6 ways Britain leaving the EU will affect you

Did somebody say recession?

Mr Carney, the Treasury and a range of international economists have warned about this. Many Leave voters appear not to have believed them, or to think that they are exaggerating small, long-term effects. But there is no doubt that the Leave vote is a negative shock to the economy. This is because it changes expectations about the economy’s future performance. Even though Britain is not actually be leaving the EU for at least two years, companies and investors will start to move money out of Britain, or to scale back plans for expansion, because they are less confident about what would happen after 2018

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6 ways Britain leaving the EU will affect you

And we wouldn’t even get our money back

All this will be happening while the Prime Minister, whoever he or she is, is negotiating the terms of our future access to the EU single market. In the meantime, our trade with the EU would be unaffected, except that companies elsewhere in the EU may be less interested in buying from us or selling to us, expecting tariff barriers to go up in two years’ time. Whoever the Chancellor is, he or she may feel the need to bring in a new Budget

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“While many businesses are treating the immediate post-Brexit period as ‘business as usual’, and hiring intentions overall still remain positive, there are signs that some organisations, particularly in the private sector, are preparing to batten down the hatches,” said Ian Brinkley, CIPD acting chief economist.

Companies ranging from British Airways owner International Consolidated Airlines Group to real-estate broker Foxtons Group have issued profit warnings since the referendum.

On Monday, the British Chambers of Commerce (BCC) has slashed its forecast for economic growth amid predictions the UK faces a “sharp slowdown” following Brexit.

The BCC warned mounting political and economic uncertainty is likely to hit investment at the same time as consumer spending being “stifled”, combining “to put a brake on investment”.

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