During April, ten out of the 14 sectors monitored by the bank’s UK Sector Tracker increased headcount - four more than in March, and the highest level since October 2022. The property sector hired at the fastest pace (producing an index reading of 59.1), followed by software and services (58.5), as greater availability of labour and stronger expectations of future output growth underpinned recruitment. A reading on the tracker above 50 indicates expansion, while a reading below that level denotes contraction.
In April, mentions of staff shortages by businesses surveyed fell to a 14-month low. Meanwhile, the tracker’s measure of future output growth expectations over the 12 months across the economy rose to its highest level in 13 months (71.4), as businesses were less concerned about the effect inflationary pressures will have on output over the coming year. Car and auto part manufacturers reported the strongest output growth expectations (83.3), followed by software and services (82.5) and food and drink manufacturing (81.3).
However, reports of wage pressures increased further during April - a factor that could impact the trajectory of inflation, the bank, part of Lloyds Banking Group, noted. In April, ten of the 14 sectors saw output expand, one more than in March.
Jeavon Lolay, head of economics and market insight at Lloyds Bank corporate and institutional banking, said: “Our report suggests that hiring activity is firming again as, alongside a pick-up in activity levels and improving confidence, many businesses reported that it was easier to recruit staff. Nevertheless, while labour availability may have improved, competition for staff is still intense in some industries and rising wages were increasingly cited as a key reason for raising output prices in April. As this was particularly the case for firms in the service sector, where wages typically account for a larger share of costs, economists will continue to focus more closely on inflation trends here to assess whether the Bank of England will hike interest rates again next month.”
Scott Barton, managing director, Lloyds Bank corporate and institutional banking, said: “It’s positive to see firms express more buoyant expectations of future output growth, while also having a slightly easier time accessing the skills and labour they need. This is an improvement, however, not a challenge ‘solved’, and the need to potentially pay more to access the labour businesses need to capitalise on growth opportunities will need to be carefully factored into firms’ growth plans and working capital requirements over the months ahead.”
The tracker includes indices compiled from responses to S&P Global’s UK manufacturing and services PMI survey panels, covering around 1,300 private sector companies. The report also features S&P Global Sector PMI indices, which are compiled by S&P Global from responses to questionnaires sent to purchasing managers covering more than 27,000 private sector companies in some 40 countries. The index is the sum of the percentage of “higher” responses and half the percentage of “unchanged” responses.