Employer confidence heading in the ‘wrong direction’ as firms plan job cuts
A new survey suggests that more firms are planning job cuts in the next quarter than at any time in the last decade, excluding the pandemic.
The latest labour market outlook from the Chartered Institute of Personnel and Development’s (CIPD) paints a bleak picture of the labour market, as firms plan job cuts in response to the government’s tax hikes.
The survey, including responses from over 2,000 employers, suggests that a quarter of employers intend to make redundancies in the next quarter, up from 21 per cent the quarter before.
Employers are looking to shed staff due to the looming increase in employment costs, with April set to usher in both higher payroll taxes and a 6.7 per cent increase in the minimum wage.
“These are the most significant downward changes in employer sentiment we’ve seen in the last ten years, outside of the pandemic,” Peter Cheese, chief executive at the CIPD said.
“Employer confidence has been impacted by planned changes to employment costs, and employment indicators are heading in the wrong direction,” he said.
The survey also pointed to the wider impact of higher employment costs on the economy. Among firms who will face higher employment costs, 42 per cent plan to raise prices, rising to 68 per cent in the retail sector.
Just under a quarter (24 per cent) are planning to cancel or scale down plans to expand their business, it suggested.
“This latest research joins a pattern of reports all demonstrating that business confidence is on the floor and a huge proportion of businesses are likely to cut jobs or hiring,” Andrew Griffith, Shadow Business Secretary said.
“A change of course by the government is long overdue. You can’t be serious about growth if you impose a jobs tax followed by the union inspired, jobs killing Employment Bill.”
The CIPD’s survey comes ahead of the latest official labour market data, which will be published on Tuesday.
The previous release showed a slight increase in unemployment, to 4.4 per cent, alongside a steep drop in the number of payrolled employees in December.
Most economists think the unemployment rate will rise to 4.5 per cent, but that December’s very sharp fall in employment will be revised upwards.
“We expect the official labour-market data, due on February 18, to show employment stagnating rather than dropping rapidly,” Rob Wood, chief UK economist at Pantheon Macroeconomics said.
Sandra Horsfield, an economist at Investec, said the trend in the number of employees in the second half of the year was “flat-to-lower…a picture that aligns better with broadly stagnant output.”