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Brexit triggers hiring cutbacks among UK employers, survey says

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

Zlata Rodionova

Monday 15 August 2016 15:59 BST

The percentage of employers planning on growing staff numbers over the next three months fell from 40 per cent before the Brexit vote to 36 per cent after (Getty)

UK employers attitudes towards hiring have become more pessimistic following UK’s vote to leave the EU, a new survey shows.

Remain campaigners had warned that if Britain voted to exit the EU in June, the country could lose almost a million jobs. Human resources professionals say the damage has already begun.

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, according to a survey by the CIPD, the professional body for HR and people development and Adecco, an employment agency.

One in five employers or 21 per cent expect to reduce investment in training and skills development following the vote. Only 7 per cent are intending to increase investment.

The CIPD said that the results suggest that post-Brexit economic forecasts of a marked downturn in the labour market in 2017, including a significant increase in unemployment, will prove to be right.

Overall 33 per cent of employers expect the Brexit vote will have the effect of increasing their costs, compared with 4 per cent that think the opposite, the survey found.

“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.

John L Marshall III, the chief executive of Adecco Group UK & Ireland, said it is clear that uncertainty around UK’s vote to leave the EU is making employers nervous.

“This caution seems sensible but unless employers want to see their growth stymied, they need to take proactive steps to future-proof their labour force,” he said.

One of the biggest fears is how the UK’s decision to leave the EU could affect the UK’s migrant workforce. The CIPD said some 20 per cent of UK employers thought some of their migrant workforce were already considering leaving the UK over the next 12 months.

“Organisations need to understand the make-up of their workforce, how restrictions on migrant talent may affect them, and where they are strong and weak on skills. The next step is thinking about how to get the right talent through your door,” Marshall said.

The survey was based on responses from 726 HR professionals between 10 to 23 June and 618 HR professionals between 8 to 17 July.

Other surveys have also suggested that the outcome of the EU referendum has had a negative impact on employment.

The number of job vacancies in London’s financial sector dropped in July as firms dealt with the fallout from UK’s vote to leave the EU, a recruitment agency said.

Morgan McKinley’s London Employment Monitor for July found available jobs had decreased by 12 per cent compared to the previous month.

On a year-on-year basis, job vacancies fell by 27 per cent.

Business confidence among UK chief financial officers plunged in the wake of the country’s vote to leave the European Union, with more than four in five expecting to cut capital spending and reduce, according to Deloitte, an accounting firm.

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

Earlier this month, the Bank of England has cut interest rates to a new historic low of 0.25 per cent and has pushed the button on another £170bn of monetary stimulus in a bid to avert the threat of the UK sliding back into recession in the wake of the shock Brexit vote.

The Bank of England said it expected unemployment to start rising again, after steady falls since 2009, hitting 5.6 per cent.

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