As accountants and tax specialists, we spend a lot of time talking to clients about the state of their businesses and their finances. One thing that is increasingly cropping up is that many firms are finding it hard to recruit. The accountancy trade press recently highlighted research by the British Chambers of Commerce (BCC) showing that 76% of business struggled to fill roles in the quarter to December 2023; an increase of 3% on the previous quarter. Frankly, we are surprised they think the increase is as low as that. The Recruitment Employment Confederation carries out monthly surveys across the UK and separately for Scotland (the former in conjunction with KPMG, the latter in conjunction with RBS). For Scotland, the latest data mirror what the recruitment industry knows and paints a similarly bleak picture. The December RBS/REC report on jobs “signalled a fresh decline in permanent staff appointments across Scotland … (with) the pace of reduction (being) the strongest since April, as growing economic uncertainty weighed on hiring decisions and discouraged workers from seeking new roles…Scottish recruitment firms recorded a fresh fall in permanent staff appointments during December, with declines now noted in four of the last five survey periods. The rate of decrease was the most pronounced since April and sharp. The reduction was linked by recruiters to heightened levels of economic uncertainty, which dampened employers’ and workers’ intentions to hire or seek out new roles.”
How then do we explain a report on 16th January in the Daily Telegraph that PwC, having surveyed 4,000 Chief Execs worldwide, believes that much of the gloom is misplaced and that, in the UK at least, the authorities (they specify the Bank of England) are “too gloomy.” Interestingly, PwC believes that the political situation in the UK will not have any major impact on investment, probably because they know that a Labour victory in the General Election is baked in so business is planning accordingly.
You can see why I’m confused, given that nearly half of the UK CEOs surveyed by PwC said they plan to increase their workforce by at least 5% because they see increased optimism about the global economy. To make matters worse/better, many experts are predicting that inflation will fall rapidly and far more quickly than previously expected (down to 1.5% by May?). Won’t a fall in inflation lead to reduced wage demands and thus reduced costs for business, leading in turn to more jobs and more hiring? Not necessarily, because the reality is that the number of job vacancies in the UK is plunging, as the chart here shows.
The plain fact is that the last three months of 2023 say the longest continuous fall on record in job vacancies. Moreover, all the data on the hiring side of the equation has to be seen against the numbers available and willing to take up any jobs on offer. Current research shows that there is a generation gap in attitudes to traditional patterns of work and, in addition, long-term sickness is playing an increasing role in skewing the unemployment figures and this is forecast to get much worse, with the benefits caseload possibly increasing by over 900 people per day for the next five years. PwC may be right in suggesting there is a bit much gloom and despondency about, but it’s easy to see why the latter is perceived to be a more realistic basis on which to assess the UK economy and our job market in 2024. I suspect it’s going to be a year of difficulty for many of our clients looking to recruit. We can’t help them with that, but we can help them make sure their businesses are in the best financial shape so that when prospective candidates do research their next potential job they see a company that is buoyant, profitable and prospering. That in itself may not be enough in today’s candidate-driven market, but it might be just sufficient to tip the balance between you and a competitor…
Callum McKinnon, M&S Accountancy and Taxation