UK employment stalls despite early signs of economic recovery: BDO

The Employment Index fell again in June to 94.22 from 94.32 the previous month, nearly at a 13-year low. Despite some positive output signals from the services sector, hiring remains subdued as businesses continue to grapple with cost pressures, BDO said in its latest Business Trends report.

The report stated that the demand for labour is adjusting in response, with many firms holding back on recruitment. This caution is reflected in payrolled employment figures, which fell by 109,000 in May—nearly twice the drop seen in April—pointing to a possible acceleration in job losses.

Business confidence continues to remain underwhelming, with BDO’s Optimism Index falling to 91.58 from 92.3 in the previous month. Core cost pressures, particularly around labour, continue to drag on margins, with the prospect of further tax rises in the Autumn adding further to a cautious sentiment.

Greater certainty following recent trade agreements with the US, EU and India offered a small boost to manufacturing business sentiment, but the sector remains volatile with no clear easing of these headwinds in sight.

The report predicted optimism will stay well below long-term averages through the second half of the year.

“There are some positive signals in the UK economy, with the BDO Output Index rising from 97.16 in May to 97.51 at the end of June, marking two months of consecutive increase,” said report.

The BDO inflation index decreased to 99.1, down from 99.59 the previous month. Meanwhile, the BDO Employment Index registered at 94.22, marginally down from May’s 94.32.

“We’re seeing early signs of recovery in business output, largely down to the services sector who have buoyed the economy for a second month in a row,” said Scott Knight, head of growth at BDO. “But, as we all know, we can’t rely on good weather forever. Businesses are treading carefully in wait-and-see mode when they need to be bold in their recruitment and investment.  Without lower labour costs, clear signalling from government and a stable policy environment, growth will remain subdued.”

The report is based on data drawn from multiple surveys, collectively covering responses from over 4,000 businesses across the UK.

ALCHEMPro News Desk (SG)