British firms have reported the fastest growth in the labour market since February 2020, according to business advisory firm BDO. In March, employment growth returned to pre-pandemic levels, the Guardian reported.
The BDO index measures business sentiment among senior managers; the organisation said it increased for a fifth consecutive month to 112.74 in February. The Guardian stated that anything above 95 points is considered to be growth.
Despite supply chain disruptions causing havoc in their sectors, managers in the manufacturing and services industries have been keenest to hire new staff, the BDO reported. However, both these sectors have been struggling to recruit due to loss of staff caused by Britain’s decision to exit the EU, as well as the pandemic, which saw many of those furloughed or laid-off from manufacturing and service jobs seek employment elsewhere.
The BDO’s findings back up recent data from the Office of National Statistics (ONS) which found that unemployment in the UK fell to 3.9% in the three months leading up to January, dropping below pre-pandemic levels for the first time.
Indeed, it’s been widely reported that the jobs market is the most buoyant it’s been in years, with more than 1.3million vacancies currently being advertised. This is an increase of 65.5% from pre-pandemic levels, according to House of Commons research. This, coupled with relatively low unemployment, has led to a tight labour market, causing staff shortages in some areas.
The House of Commons research suggested that there are 1.1 unemployed people for every vacancy, compared to 1.8 pre-pandemic – however, some of those unemployed people are unlikely to return to the labour market, for a variety of reasons, and others may not have the skills needed to fit the vacancies.
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The Institute for Employment Studies has suggested that the demand for workers is holding back growth and may even push up inflation.
And with inflation soaring, and the cost-of-living crisis in full swing, there is concern that this jobs boom is not set to last, as businesses begin to tighten their belts once more. Kaley Crossthwaite, a Partner at BDO, is reported by the Guardian as saying: “The labour market has shown resilience throughout the pandemic and then continued growth as restrictions have gradually lifted. While it’s reassuring to see employment return to near pre-pandemic levels, this strong form could come to an end as the cost-of-living crisis, rising inflation and wider geopolitical matters distract businesses from growth and place pressure on the employment index.”
The Resolution Foundation, an independent thinktank which monitors living standards, echoed the view that workers will not benefit from a buoyant job market once firms start to feel the effect of soaring inflation and energy costs. Not only that, but the workers will also feel the pinch on their existing pay packets. Nye Cominetti, a senior economist at the Resolution Foundation, said: “With inflation set to reach eight per cent in the coming months, most workers’ earnings will fall in real terms, further squeezing living standards in the months ahead,” the Guardian reported.