Firms on the hunt for staff despite labour squeeze 

Employers are planning on expanding their workforce despite an ongoing labour squeeze scuppering recruitment efforts, reveals a new survey published today.

A net 24 per cent of companies intend to ramp up hiring over both the medium and long term, according to a survey by the Recruitment and Employment Confederation (REC).

Strong hiring intentions indicate employers are not being deterred by a smaller labour pool making recruitment more costly and time consuming.

Workers at the older and younger end of the workforce have dropped out of the workforce, primarily driven by taking early retirement and staying in education until the economic recovery from the Covid-19 crisis has played out in full respectively.

As a result, “there is a huge participation gap in the labour market right now,” Neil Carberry, chief executive of the REC, said.

A tighter labour market has intensified competition between firms to secure workers, putting upward pressure on wages.

A near 30-year high inflation rate has strengthened workers’ incentives to demand higher pay to protect their living standards. The Office for National Statistics estimates real earnings dropped 1.2 per cent in December.

There is concern a swelling wage bill could prompt businesses to hike prices, feeding into further inflation and encouraging staff to demand more pay rises, triggering a wage/price spiral.

The Bank of England has pinpointed wage pressures as a key risk to higher prices becoming embedded in the economy in the long run.

Governor Andrew Bailey earlier this month ignited fury when he asked workers to temper wage demands to help offset inflationary pressures.