UK jobs market surges to pre-pandemic health but inflation crunch looms

The recession of Covid-19 restrictions has sparked a recruitment drive by British businesses, reveals a fresh survey released today.

An uptick in spending as Brits head back to high streets after the end of Plan B measures is encouraging firms to take on more staff, according to research by accountancy firm BDO.

Businesses are scrambling to capitalise on a resurgence in demand by expanding their workforces.

BDO’s employment index climbed for the fourth month in a row to nearly 111, the highest level since before the virus struck in February 2020.

“As businesses fully re-open and resume normal operations, they have been looking to hire more staff to cope with increased demand,” BDO said.

Optimism about the future trading environment was boosted by the end of Covid-19 curbs.

However, the possibility of the Russia-Ukraine crisis swelling costs for businesses is likely to erode confidence over the coming months.

Firms are already coping with rising staffing costs as a result of a tight jobs market generating strong competition for talent.

The Bank of England has warned spiralling wage costs could lead to a higher cost of living being embedded in the UK economy.

Inflation is expected to breach nine per cent in October due to the Russia-Ukraine conflict driving up wholesale energy prices, causing the UK energy watchdog to hoist the price cap on bills a further 55 per cent, according to economists at Goldman Sachs

Separate research by IHS Markit released last week revealed services businesses are hiking prices at a record rate in a bid to offset inflationary pressure.

Kaley Crossthwaite, partner at BDO, said: “While it’s promising to see growth in business optimism throughout February, this could be short lived as inflation continues to rise at a faster rate than wages.”

“Inflationary pressures are set to mount further over the coming months, with energy and fuel prices key drivers of this increase,” she added.