UK employment slows ahead of Brexit finale

As the Brexit process seemingly enters its final act, with the delayed deadline of October 31st looming large, the outlook for UK employment has fallen to its lowest in more than a year. According to research from BDO, hiring intentions of UK businesses have slumped for the second consecutive month after six years of sustained growth.

With the Brexit process having stalled, confidence in the UK economy sits at a low-point. Recent studies of both large and small businesses have found that British capital is facing a turbulent 12 months. As a No Deal scenario once again looms in October, the country is said to be on the brink of a recession. Understandably then, small and mid-sized enterprise leaders in Britain and Ireland harbour serious reservations about the performance of the nations’ economies in the coming year, while more than 9 in 10 think that economic conditions have worsened in the last 12 months.

Brexit is expected to have a major impact on employment too. While the UK’s unemployment rate currently stands at its lowest since 1971, this seems be partly aided by lax employment laws that incentivise companies to hire large numbers of staff rather than invest in things like plant machinery. In the event of a recession, it would be easier to reverse the hiring process in the event of needing to make a swift exit from the UK rather than divesting a large amount of equipment. With many firms still waiting to see the outcome of Brexit, a large number of jobs could soon exit the country.

Further suggesting the coming geo-political changes will bring with it a reckoning for the UK workforce, the BDO Employment Index for June has revealed a major downturn in the number of job vacancies, as well as a slowdown in weekly earnings growth. It declined by 2.29 points from January to 112.82 points for June. As well as suggesting many companies are increasingly expecting to have to downsize their workforce in the immediate future to protect their profitability among economic turbulence, this is liable to have a knock-on effect on the broader economy.

According to Peter Hemington, a Partner at BDO, “while the numbers remain in positive territory”, growth is slowing, and could spell the end to the “glory years of rising UK employment figures.” The index shows that the current economic slowdown is ultimately expected to halt potential growth in employment opportunities, following years of growth.

Stagnant wages have been hampering consumer confidence for some time, with the decreased spending power of UK residents seeing them scale back on most forms of spending that could be termed a ‘luxury’. In turn this has seen a sustained high street crunch in Britain, with store closures reaching decades-long highs at present. This is while rising employment is said to have improved the number of ‘empowered’ consumers able to spend on the high street – meaning that a fall in the number of new jobs will likely compound the misery of UK retailers.

This will in turn hit manufacturing in the UK hard, with falling demand ultimately harming the nation’s productivity. BDO’s latest figures show this is already at hand, displaying a sharp drop in UK manufacturing output. The professional services firm’s manufacturing index for June fell to 92.83, its lowest figure since December 2016.

Hemington concluded, “The labour market has been resilient to the potential effects of Brexit, but months of negative sentiment has finally taken its toll. Businesses’ hiring plans had remained buoyant in the face of uncertainty. But as confidence begins to turn, there’s no sugar-coating the fear that job prospects will take a hit.”