Jessica O'ConnorThe number of UK employers expecting to increase headcount in the next three months has fallen to a record low, outside of the pandemic, as they grapple with rising employment costs and growing global uncertainties, research from CIPD has revealed.
The Labour Market Outlook from CIPD showed that the rate of employers expecting to increase headcount has fallen sharply among large private sector employers, and in retail in particular.
In response, the CIPD has urged the Government to closely consult with employers and business bodies to limit the potential impact the Employment Rights Bill could have on employer’s hiring plans as businesses face mounting external pressures.
This latest survey of more than 2,000 employers from the CIPD, the professional body for HR and people development, found that the net employment balance (NEB) – the difference between employers expecting an increase in staff levels and those expecting a decrease in the next three months – fell from +13 last quarter to +8 this quarter.
This marks a record low, outside of the pandemic, since the CIPD began collecting this measure in 2014.
The net employment balance fell into negative territory in the public sector, from +3 to -4, and has continued to fall in the private sector, from +16 to +11, which is a record low outside of 2020 (the pandemic).
In addition, one in four employers (24%) planned redundancies in the next three months.
This is consistent with last quarter but higher than the 21% registered in autumn.
The retail and education sectors faced acute pressure. The NEB for retail fells from +23 in Autumn 2024 to –19 this quarter.
Just one in 10 (11%) retail employers expected there to be an increase in staff levels in the next three months, with three in 10 (30%) expected a fall in staffing levels.
The NEB was also in negative territory, -13 among employers in compulsory education which includes primary and secondary education, and -7 among those in non-compulsory education, which includes vocational and higher education institutions.
Overall, 61% of employers planned to recruit in the next three months, down from 64% in the previous quarter and 67% in autumn 2024.
James Cockett, senior labour market economist at the CIPD, said: “From April, employers across the UK have begun to feel the full effect of increases to National Insurance Contributions and the National Living Wage outlined in last year’s budget.
“They’re also looking at the potential impact of the Employment Rights Bill on employments costs and plans, and this comes at a time of global uncertainty. Employer confidence is low which is being reflected in their hiring plans.
“The Employment Rights Bill is landing in a fundamentally different landscape to the one expected when it formed part of the Labour manifesto in summer of last year. It was always going to be a huge change for employers but they’re operating in an even more complex world now. It’s vital the Government works closely with employers to balance the very real risk of reductions in investment in people, training and technology with their desire to reduce poor employment practice.
“The Government can address employer nerves around the bill by prioritising an implementation plan with a clear phased timeline, alongside support and guidance for employers, and smaller businesses in particular.”
