Surprise, employers are still looking to hire as skills shortages bite

A survey put hiring intentions at a net positive. While that was down on the previous quarter, skills shortages are widespread and that is making employers reluctant to launch redundancy programmes, writes James Moore

Britain’s rate of unemployment remains very low by historic standards as a survey showed more employers planning to hire than fire (PA)

While big tech indulges in slash and burn after its pandemic-era hiring spree, the UK labour market remains remarkably calm for a country that the OECD expects to have the worst-performing economy outside of Russia among its members.

Manpower, a recruiter, releases a survey of hiring intentions at this time of year. Its most recent missive, which emerged at the tail end of last week, showed a positive outlook of plus 19 per cent over the coming quarter (January – March).

Despite all the government’s talk of levelling up, London remained in the strongest position (plus 24) while IT was the strongest sector (plus 34). There is still strong demand for those with IT skills, which remain in desperately short supply.

The wider UK narrative would certainly appear counterintuitive given the gloomy economic backdrop. Yes, the labour market is a lagging indicator with respect to economic health. But there has been enough evidence of a slowdown to suggest that it ought to be feeding through, certainly on what Manpower looks at.

True, its survey – based on the responses from 2,030 UK employers who are asked if they intend to hire additional workers, maintain current headcount, or reduce the size of their workforce in the coming quarter– has come off a bit. It stood at plus 24 over the previous quarter (October – December).

But it is still indicative of more hiring than firing over the coming months during which the economy is expected to shrink.

The last set of official labour market data from the ONS showed a slight easing in the number of vacancies and a slight increase in the rate of unemployment to 3.7 per cent. That was partly through over-50s starting to return to the labour market. There has been no real sign of a recession-driven jobs crunch. At least not yet.

How long will employers be able to hold the line? They would certainly like to. Redundancy programmes are costly and disruptive and inevitably mean they end up losing people they would really rather hang on to.

That is particularly problematic given where the labour market is right now. IT is the most obvious shortage area but it is far from the only sector suffering from a dearth of qualified candidates.

Retention of skilled talent remains a high priority for many employers. If the economy performs as poorly as expected, one would still expect hiring intentions to further come off and unemployment to head northwards later in the year. But employers will likely seek to reduce headcount through “natural wastage” – a horrible phrase that – for as long as they can. The phrase “hiring freeze” will be heard a lot more than “redundancy programme” at least in the early part of this year.

Even these may be more selective than usual, such that if gaps open up in key areas, efforts will be made to fill them if possible. I rather like how Manpower’s director Chris Gray put it: “This situation can be likened to a leaky bucket – employers have to keep hiring at pace just to maintain position and not lose out amidst an ongoing skills shortage.”

This will, obviously, make the recession much easier to bear. A downturn with low unemployment is, obviously preferable to one with queues stretching around the block at branches of Jobcentre Plus.

Employers won’t be overly fond of spending any money in the current environment but they should consider investing in training and development of their remaining workforces while they have the opportunity. If skills shortages are acute now, imagine what it will look like when things start to pick up again. Even if they lose some of the staff they train, they will enjoy net benefits.

Organisations such as the CBI have, of course, been making this case to their members for years. Now would be a fine time to listen.