Employer caution increases in wake of vote for Brexit

Employers are being urged to keep investing in their workforces amid increased ­caution over hiring intentions and expected higher costs after the Brexit vote, a report has found.

Employers are being cautious in the wake of the Brexit vote. Picture: AFP/Getty Images

The latest UK & Ireland labour market forecast from the Chartered Institute of Personnel and Development (CIPD) and recruiter Adecco Group looked at UK employer sentiment in the two weeks before and two weeks after the EU referendum.

It found that the proportion of employers expecting to increase staffing over the next three months dropped from 40 per cent pre-Brexit to 36 per cent following the decision.

Consequently, the net employment balance, based on the difference between the share of employers expanding their workforce and the share reducing theirs, dropped from plus 21 pre-Brexit to plus 17 post-Brexit.

However, the fall was much steeper in the private sector, with the post-Brexit employment balance declining to plus 25 from plus 39 pre-Brexit.

The study also found that only 4 per cent of employers expect Brexit to lead to an increase in costs, compared to a third who forecast an increase amid the softening of the British pound and the expectation of this continuing in advance of more clarity on EU exit terms.

Ian Brinkley, acting chief economist at the CIPD, said: “The economy had positive momentum going into the referendum and there is a risk that employers will create a self-fulfilling prophecy if they over-react in the expectation of a downturn.

“Instead of looking at cuts, now is the time to be talking about investment in people and in processes and equipment that will boost productivity and improve the resilience of businesses and our economy.

“Employers are rightly thinking about the impact that the EU referendum decision will have on their migrant workers and how they can best support their workforce,” he said.

The report found that 62 per cent of employers currently employ some EU migrants, and one in five thought that some of their migrant workforce were already considering leaving the UK over the next 12 months.

He added: “It’s vital that businesses don’t put the brakes on investing in their people or taking steps to raise productivity. This is the exact opposite of what will be required if we face a reduction in the future supply of skilled labour from outside the UK.”

John L Marshall III, chief executive of Adecco Group UK & Ireland, added that caution “seems sensible but unless employers want to see their growth stymied, they need to take proactive steps to future-proof their labour force”.

He said such steps include focusing on how to attract talent, with four in ten companies believing it will be harder to hire EU migrants over the next 12 months due to Brexit. “There is undoubtedly uncertainty but this is also a time of opportunity for organisations to get ahead.”