UK labour market data - ONS - Oct 2022

There's a lot of talk about uncertainty among employers amid the current economic turmoil but it fails to take into account how battle-hardened many companies have become in recent years due to the pandemic. Uncertainty, these days, is the bread and butter of British business. They live and breathe it. Businesses have experienced so much economic uncertainty since 2020 and have demonstrated such resilience that they are continuing to push forward and battle on. As a result, we are still seeing businesses hiring and looking to the future. Where we have seen change is in the shift of power between candidates and employers. Candidates no longer hold all the cards and we are starting to see employers having more choice when they are recruiting. Employees, for their part, are looking at their overall packages and not just salaries. If they have the option to earn commission or are able to work extra hours and they feel they are well looked after, valued, have the option of flexible working and love what they do, money is not such a motivator. If none of the above are on offer then pay rises in line with inflation will definitely be on the agenda. Utilitarian employers will be condemned to utilitarian employees who focus on pay and pay alone. The current skills shortage across numerous sectors is due to Brexit and the lack of EU workers now available. The talent pool has shrunk as all sectors are now fishing from the same pond. In some sectors, however, there are vacancies aplenty. Those looking for work still have a very clear idea of how they would like to work and when they would like to work. Equally, those who are in work are appreciating the security of an income in such turbulent times.

Despite the dark clouds of uncertainty that are blanketing the economy, employers are continuing to push ahead with recruitment with a view to achieving their planned 2023 goals. Due to a shortage of available experienced talent, candidates still have the upper hand currently, a trend that has been present for several years now. As a result, businesses are still seeking advice on how to remain attractive before they launch a job ad, as it's about more than just pay these days, but flexibility, too. We're finding businesses that are embracing new talent by supporting trainees are making great headway. There remains a strong pipeline of individuals looking to enter the financial services industry.

We certainly aren't seeing any slowdown in our industries, namely insurance and Financial Services, and vacancies still remain at an unprecedented level. This in turn means that the candidate is still king, which is still pushing up salaries, which is a result of businesses battling it out for the best talent, rather than companies offering more due to inflation. We're also continuing to see candidates looking for hybrid employers, too, and don't think that will change anytime soon despite the cost of living crisis and uncertainty in the economy. The pandemic was a catalyst of fundamental change in the UK workforce.

We are seeing an increase in enquiries from people who have been dismissed and businesses looking to make people redundant. Whilst this is not yet a tidal wave, it is certainly showing signs of being a storm swell. Some companies are taking the opportunity to protect their business for what they see as difficult trading days ahead, by reducing wage budgets. Those that are being laid off seem to be able to find work quickly due to other companies still actively hiring but the warning signs are definitely flashing. We are also seeing an increase in enquiries from employees who accepted jobs on the basis of being able to work flexibly and are now finding that their new employers are changing what that means in practice. One employee told us that their employer had promised they could choose how many and what days they worked in the office and understood that they had childcare commitments. They are now being told they have to work three set days in the office or face losing their job. As the economy stalls, the goalposts are starting to shift.

We are still seeing a candidate led market, with passive job seekers only moving for the most enticing and stable of offers. We've had candidates at offer stage asking that probation periods be removed from offers, and bonuses guaranteed for the first year over the past few weeks as well as negotiating hard on the hybrid working split of days working from home. So, whilst there is movement in the market, with people still taking up new opportunities, they are looking for more certainty and less risk, so start ups and sectors more reliant on disposable income such as hospitality, once again struggling to recruit.

The social care and education sectors are still very much struggling to recruit. Candidates are few and far between, and when candidates are identified, they are demanding so much more than most employers are able to offer. Candidates want higher salaries and increased flexibility, and for many employers, this just isn't viable. There are no winners in these stalemate situations.

Wage data indicates that while average nominal wages have grown at almost record levels this year, indicating that increased job hopping and salary rises have paid off for employees, real wage growth is at a decade-long low thanks to sky-high inflation. Flexible and hybrid work are both here to stay. Recent Glassdoor research found that employees happy with their hybrid work situation were less likely to apply for other jobs. Job seekers’ preferences for hybrid or flexible work mean that they will stick around, even through a cooling labour market. Much like the weather, this report is expected to show that the labour market is cooling. For the past two months job vacancies have dropped as employers exercise caution amid rising energy costs and an uncertain economic outlook. However, despite this slowdown in attempted hiring, employees still hold most of the cards in the war for talent as the labour market remains tight. Face-to-face, relatively low-paid industries like healthcare and hospitality have particularly struggled to fill vacancies since pandemic lockdown restrictions were lifted. The labour shortage in healthcare shows no sign of improving anytime soon; demand is unlikely to slow down even while the NHS and social care face drastic staffing crises. While hospitality is particularly vulnerable to energy price increases and cutbacks in consumer spending, job openings remain elevated as the supply of EU citizens (formerly a consistent supplier of workers) has dried up and other industries offer higher pay and more flexibility.