UK employment has plunged to its lowest point in a decade, and the outlook appears increasingly grim, according to a recent report from BDO, a prominent accounting and business advisory firm.
The firm’s latest employment index report discloses that the index has dropped for the sixth consecutive month, reaching a reading of 99.12 points—the weakest since August 2013.
While the report notes marginal increases in business owner optimism over December, driven by strong hiring demand in the service sector, BDO warns that the overall employment landscape is set to deteriorate further.
The firm attributes this bleak outlook to shrinking job vacancies, which have contributed to the overall decline in employment levels.
GDP to remain stagnant
Despite the modest uptick in optimism, BDO predicts that the UK’s gross domestic product (GDP) growth will remain stagnant in the coming months, citing persistent effects of higher borrowing costs and inflation. Business confidence, while showing modest growth, is constrained by the cost-of-living crisis, reduced spending, and international conflicts.
BDO anticipates a continued decline in UK employment due to the prevailing “uncertainty” surrounding interest rates and weak business demand. The report forecasts an unemployment rate peaking at 4.6 percent during the second and third quarters of 2024, highlighting persistent concerns over the state of the labour market. For context, the most recent official data from the Office for National Statistics (ONS) recorded an unemployment rate of 4.2 percent over the three months to October.
Renewed government support is needed
Kaley Crosswaite, a partner at BDO, expressed a degree of encouragement amid the challenging circumstances. “It’s encouraging to see our resilient services sector spearheading a small upturn in optimism and output during December, as the festive season offered a welcome respite for businesses,” Crosswaite noted.
However, BDO acknowledges that the positive sentiment might not be sufficient to offset the broader challenges. As businesses enter 2024 on a somewhat brighter note than the previous year, the report emphasises the critical need for renewed government support to enhance productivity, increase recruitment, and bolster skills. Ms. Crosswaite concluded, “Only with this support can we continue to revive the economy.”
This report comes at a critical juncture as policymakers and businesses grapple with the complex task of navigating economic uncertainties and charting a path towards recovery.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.