After months of endless Brexit uncertainty, the UK seems no closer to reaching a deal as March 29th fast approaches. As each new statistic is scrutinised for clues to what might lie ahead, the true effects of the Brexit limbo are unclear, as the business sector makes short term contingency plans to cope with delays and loss of investor confidence. It’s true that the worst-case predictions of recession and mass unemployment haven’t happened. In fact, on the surface, unemployment is low and many sectors are experiencing continuing buoyancy and expansion. However, the worst-case scenarios assumed that article 50 would trigger the exit process immediately following the vote, rather than nine reluctant months later. Here’s our run down on the state-of-play and why the Brexit mirage may yet have long-term repercussions for our jobs market if a deal fails to materialise.
The Bank of England’s recent announcement that inflation has fallen from 2.1% will be welcomed by most businesses. Low inflation contributes towards economic stability – which encourages saving, investment, economic growth, and helps maintain international competitiveness.
The soaring rates of the last two years reflected a drop in the exchange rate in the aftermath of the referendum. This meant that sterling was worth about 10% less than it was previously. The repercussions of high inflation saw a corresponding rise in the cost of many imports; while slower pay rises saw a sharp decrease in high street spending.
So does the current fall in inflation indicate a healthier economy? In fact, it would seem that lowered oil prices are what’s driving inflation down. Recent ONS (Office of National Statistics) figures revealed a sluggish economic performance, with the Bank of England forecasting a growth rate of 1.2% – the slowest since 2009 when the economy was in recession. The ONS said the figures reflected a slowdown across a number of industries, as Brexit-related concerns weighed on business spending decisions.
Surveys over the last couple of months have suggested export orders have dried up, perhaps as customers fear a no-deal scenario could spell delay and extra charges on delivery. As a result, the Bank now calculates the total level of GDP is about 1.2% lower than it had expected three years ago.
This is the only time since 2012 that services, construction and production all fell. In the final quarter of last year, car manufacturing declined at its steepest rate in just under a decade, slipping 4.9%. Construction fell 0.3% while business investment dropped 1.4%. Although Britain’s dominant services sector continued to expand, growth slowed to 0.4%.
Experts at the British Chambers of Commerce (BCC) said it was further evidence that “slowing global growth and continued uncertainty over Brexit are making trading conditions for UK exporters more challenging. There is currently a drag on growth as some businesses are forced to hold back on major investments and engage in cautionary stockpiling.”
Activities such as ‘stockpiling’ in manufacturing have been driven largely by companies speeding up production to avert the risk of disruption after 29th March. In doing so, the long-term repercussions might be even more severe if the spending ‘dividend’ anticipated by the government isn’t released post-Brexit.
There’s growing evidence to suggest that the unnatural economic conditions caused by months of Brexit speculation are leading us into murky waters. For example, reduced spending on buildings and equipment might help explain why employment is at a record high. Holding onto workers rather than investing in major projects is the cheaper and more flexible option for many businesses.
UK professional services indicators reveal that Brexit has generally been positive for hiring, especially across the legal and tax professions as organisations seek to prepare for Brexit. Emerging sectors like Technology, Media and Telecommunications (TMT) were also active in hiring, with many companies selecting interim support for these positions, allowing them flexibility to scale up for market demand without long-term commitment.
High unemployment, however, isn’t the whole story. ONS statistics show the number of vacancies at 845,000 for August to October 2018, the highest since comparable records began in 2001. The number of EU nationals working in the UK fell by 132,000 to 2.25 million, the largest annual fall since comparable records began in 1997.
Recruitment & Employment Confederation (REC) director of policy, Tom Hadley commented on ONS figures: “Employers across many sectors are continuing to experience fundamental challenges in finding the staff and skills that they need. UK businesses will need to work with recruitment partners to innovate and review current hiring. At the same time, the case for a pragmatic, evidence-based immigration strategy that reflects staffing needs across all sectors has never been clearer”.
Organisations such as The NHS have relied on doctors and nurses from overseas for decades, particularly from Europe. The NHS European Office has reported that almost 7% of the of the UK medical workforce come from EU countries, with another 20% having trained there. Although the NHS featured prominently in the referendum campaign with promises of extra funding, as the UK prepares to leave the European Union, there is no solution on the table for funding and staffing for the NHS.
For UK workers, the upside to high unemployment is a sellers’ market as candidate scarcity creates an urgent demand for skilled workers. Many companies are creating new Brexit-specific positions and there’s also been a significant increase in project based roles for the contractor market. It’s also anticipated that competition for candidates will help to drive improvements in workplace culture (pay, flexibility, worker’s rights) as firms increase their incentives to attract talent. Independent bodies are predicting continued demand in the following sectors:
-Public Practice: Big 4 and Top Ten firms continued to hire into teams across the entire UK. Professionals with experience in cloud computing softwares were in demand for this sector: Xero, Quickbooks and Sage Business Cloud
-Tax: FinTech, IT and Ecommerce platforms increased their hiring of permanent tax professionals. Companies prepared for Brexit by carving out specific project roles, such as Head of Brexit Tax, within team infrastructure that were filled with interim professionals
-Legal: Brexit resulted in increased hiring for both temporary and permanent in-house lawyers with specialist knowledge in Data Protection, Banking/Finance & TMT, 6+PQE (employment law)
-Accountancy: If the deal is sealed the status quo will be maintained until the end of 2020, giving all concerned more time to plan and adjust. However, after the transition period many changes will come into effect. Clients need more accountancy advice and extra help with planning, forecasting, and managing working capital
-Healthcare: With over 4.5 million people having contact with the NHS every week and this being forecast to rise with an ever-ageing population, staff in all areas of healthcare are in urgent demand.
If you’re looking for permanent or temporary employment then our team at RoQ can help, call now on 0800 971 7070.