Recruitment Static as Firms Assess NI Impact

The British Chambers of Commerce (BCC) Insight Unit’s latest Quarterly Recruitment Outlook (QRO) shows hiring remained largely static in Q2 as firms dealt with the employer National Insurance (NI) hike.

55% of responding firms attempted to recruit in the last three months, broadly similar to the 54% in Q1. Of those firms trying to hire staff, 73% said they experienced difficulties, a slightly improved picture from the previous quarter (76%).

The research for Q2 was conducted after the NI rise came into force, with the fieldwork conducted between 12 May and 9 June. Over 4,500 businesses across the UK (93% of whom are SMEs) responded online.

The hiring landscape varies for different sectors, with recruitment difficulties in transport and logistics companies remaining the highest at 80% (compared with 82% in Q1) followed by construction and engineering business at 77% (83% in Q1).

Most firms didn’t increase the size of their workforce in Q2, with 60% saying staffing levels remained the same. However, 23% did increase their staff numbers, up slightly from 20% in Q1. Looking forward, firms are less optimistic – with only a quarter (25%) expecting to boost their workforce over the next three months, compared with 27% in Q1.

Labour costs remain the biggest cost pressure for businesses, cited by 73% of respondents, the same as Q1. The issue is most significant for transport and logistics (88%) and the hospitality sector (83%). Faced with those rising costs, training investment remains relatively static, with 23% of firms saying they increased investment in Q2, compared with 22% in Q1. Most businesses (59%) didn’t spend more on training in the last three months.

What business say:

“The position remains the same, attempting to cover the vastly increased wage bill due to NIC rises, as well as other cost increases, without the ability to pass on to the customer, which has directly impacted recruitment and growth plans.” – Medium professional services in Liverpool

“The Labour government say they are helping working people but forget that those working people need to be working somewhere, and businesses are being hit with increasing costs that will affect recruitment decisions.” – Micro manufacturing firm in East Midlands

“Increase in Employer’s NI was not favourable and has reduced training for staff and recruitment of new staff.” – Small public sector firm in Suffolk

“Wage costs are a real danger to small businesses. We have limited resources and can only pay out what we have in the bank. Wage costs will be our main area where we will need to reduce outgoings by cutting staff numbers/ hours.” – Small hospitality firm in Dorset

Jane Gratton, Deputy Director of Public Policy, at the British Chambers of Commerce said:

“While it is still early days, firms are beginning to sound the alarm on the impact of NICs and other employment costs. There could a big shock coming further down the line.

“Increased labour costs and persistent skills shortages are making recruitment a significant challenge for SMEs.

“Firms tell us they are having to adjust budgets, especially for workforce growth and people development. Whether that is recruiting fewer staff, not replacing staff who are leaving, or scaling back training budgets – there is no doubt that higher employer costs are having an impact.

“At the same time, growth and productivity is being stymied by persistent skills shortages, particularly in sectors like transport, logistics and construction.

“We need urgent action by policymakers to tackle the long running skills crisis. That means a more flexible and responsive training system, better support for people facing barriers to work, and a firm commitment to no further tax hikes on business.

“Our recently published Blueprint for Growth provides clear policy proposals, which if implemented, can help resolve the recruitment headache, and put businesses in pole position for turbocharging the economy.”