Hiring intentions remain strong despite recession fears
Hiring intentions remain strong despite recession fears
- BDO’s Employment Index reached its highest reading in over two and a half years, as firms are still recruiting to fill vacancies
- BDO’s Optimism Index fell for the fourth consecutive month reflecting the downward pressure on economic activity.
- Declines in employment are expected towards the end of the year, mirroring the trends seen during the 2008 financial crisis.
Hiring intentions among UK businesses remain strong despite a turbulent outlook across output and inflation, according to the latest Business Trends report from accountancy and business advisory firm, BDO.
The BDO Employment Index soared to 114.79 in July, its highest level since January 2019, up 0.23 points on June. Staff shortages heightened by Brexit and the COVID-19 pandemic have been driving a buoyant labour market as firms push hard to recruit. This can be seen in the unemployment rate which stood at 3.8% in the three months to May.
However, BDO’s Inflation Index shows no sign of slowing, reaching a further record high of 118.72. Growth was driven by increases across both the input inflation and consumer inflation indices, with the former recording its highest ever reading of 121.19 due to a weakening currency, supply side shortages and significant supply chain disruption.
This tough inflationary environment and the threat of a recession look to diminish employers’ hiring intentions towards the end of this year, mirroring the trend of decline that was seen by the Employment Index during the 2008 financial crisis.
In line with the decline in economic activity, BDO’s Optimism Index fell 0.30 points to 101.53, its lowest point since April 2021. While both the services and manufacturing subindices experienced a fall, the overall decline was driven mostly by the latter with a 0.69-point decrease.
Lower business confidence aligns with an overall dip in BDO’s Output Index, which remains below 100, the measure indicating long-term growth, for the second consecutive month. However, the Output Index posted a slight increase overall of 0.42 points in July to reach 98.66, led by an uptick in consumer activity across the manufacturing and services subcomponents.
Kaley Crossthwaite, Partner at BDO LLP, said:
“Reports of a less optimistic outlook are by no means surprising as the economy now faces the prospect of a recession towards the end of the year. Although it’s encouraging to see recruitment intentions remain strong, we know that talent shortages are an issue, with many businesses reporting they are struggling to find people with the right skills.
“Despite the current hiring activity, we’re likely to see demand for labour and the Employment Index decline later in the year, with employers devoting their resources to managing inflation, interest rate rises, and ever-growing energy costs.”
ENDS
Overview of the BDO indices:
An overview of all four indices is provided in the table below, detailing figures for the last three months and the same month of the previous year, to allow for comparison. 100 = average value. Above 95 = positive.
|
|
July 2022 (Figures for this report) |
June 2022 |
May 2022 |
July 2021 |
|---|---|---|---|---|
|
BDO Optimism Index |
101.53 |
101.83 |
101.93 |
111.92 |
|
BDO Output Index |
98.66 |
98.24 |
102.26 |
113.22 |
|
BDO Inflation Index |
118.72 |
117.85 |
116.25 |
103.01 |
|
BDO Employment Index |
114.79 |
114.56 |
113.89 |
107.62 |
Note to editors
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