FTAdviser.com

Advertising

The media is dominated with stories about the economic downturn. But the headline stories that have grabbed most attention during the past year – the fall in house prices, the collapse of Northern Rock and job losses in the City – do not reflect a balanced picture of what has taken place within UK organisations during the past 12 months. Such a picture is provided in the Chartered Institute of Personnel Development’s annual recruitment and retention survey, a representative survey of UK employers that uniquely looks at the inter-relationships between redundancies, recruitment and labour turnover trends.

It is frightening to think that we are almost a year into the credit crunch. And while there have been some casualties, it is remarkable how well the jobs market has held up since the start of the credit crunch. As the official government job statistics to June 2008 show, employment levels are at a record high. And while redundancy and unemployment rates have risen in a consecutive manner in the last few months, they remain very low by any definition. This picture is mirrored by the remarkably strong set of figures is reflected in the key findings contained within the CIPD’s annual recruitment and retention survey – which presents employers with problems, not least with finding suitably qualified staff.

It shows that the proportion of employers experiencing recruitment difficulties remains stubbornly high; down just 3 per cent to 81 per cent of employers. As the report states, this has contributed to making the past year ‘a candidate’s market’. The reason for such difficulties becomes clearer when looking at the survey in the round. It shows that employers have responded to the largely benign economic conditions in 2007 by reducing redundancies – therefore lowering involuntary labour turnover, operating fewer recruitment freezes and gradually increasing overall recruitment – in the process raising voluntary labour turnover by providing potential job-quitters with more alternative job options to choose from.

The offsetting net combination of these recruitment and redundancy patterns was therefore to leave the overall labour turnover rate broadly unchanged, although the rate is slightly lower than 12 months ago; a signal, perhaps, that candidates might be starting to feel more nervous about quitting their current roles.

However, while on one level these figures are still very good, there is a lag between these figures and current and future activity does not tell us how UK businesses are preparing to deal with rising inflation, rising fuel and food costs and higher borrowing costs.

Snapshot

Unlike the recruitment and retention survey, the CIPD/KPMG’s quarterly Labour Market Outlook provides such a forward-looking snapshot, by highlighting net recruitment intentions among UK employers. The two most recent reports have suggested that 2008 will be a more difficult year for employers and employees alike; with the prospect of higher redundancies and less recruitment, particularly in the public sector and in London.

The long era of the candidate’s market may, therefore, be coming to an end, particularly if some of the gloomier economic forecasts come to fruition.

The predicted jobs slowdown will particularly affect younger workers and graduates, who stand to suffer most from any recruitment freeze. However, the intense competition for both skills and talent will undoubtedly remain, particularly for sought-after skills such as engineering. Much will now depend on the Bank of England’s capacity to lower interest rates to stimulate economic growth; although this capacity looks set to be severely restricted by inflationary pressure concerns in 2008.

If recruitment difficulties do continue, the government’s substantial investment in adult skills would seem a very appropriate and timely one. The bulk of government funding is currently aimed at improving the literacy and numeracy of lower-skilled employees through the government’s flagship training initiative, Train to Gain.

This is a free and independent brokerage service, whose funding priorities are mainly targeted at employees with low levels of basic skill or who do not have level 2 qualifications. Specific funding initiatives are also in place for achievement of management and leadership qualifications and some level 3 qualifications.

However, the CIPD argues that if government is to realise its ambition of raising the nation’s productivity levels, it needs to widen its support to sectors and professions where recruitment difficulties are most acute. Employers should be playing their part too. By investing in training they can add to the supply of skilled labour, and thereby alleviate skill shortages and combat recruitment difficulties.

With this in mind, the news that the government is earmarking £200m for training in key sectors of the economy, such as construction and IT, is therefore welcome. As the survey shows, the most effective method of addressing recruitment difficulties is to provide additional training to allow internal staff to fill posts – not to recruit people who do not have the necessary skills; which is sadly the most prevalent method used to overcome difficulties.

Potential

However, it should be added that this figure still represents less than a fifth of the government’s eventual annual contribution to Train to Gain. This figure might look more understated if some of the potential, and in some cases likely, changes to the labour market take effect. These include the government’s ambition to get 1m incapacity benefit claimants into work and the potential reverse migration of workers from and to EU accession countries.

Indeed, the influx of migrant labour into the UK has become particularly marked since 2004, when migrant workers from EU accession countries became eligible to work in the UK. As the Recruitment, Retention and Turnover survey shows, a sizeable proportion of UK employers, 14 per cent, has taken advantage of this relatively new pool of talent and labour during the past year.

Further, almost two-thirds say that migrant workers have had a positive impact on their organisation. However, as a study published by the Institute for Public Policy Research earlier this year indicates, a steady inflow of EU migrants cannot be taken for granted in the long term, with large-scale reverse migration a distinct possibility.

The scenarios for 2008 therefore remain finely balanced. But either way, the challenges for the year ahead around skill shortages and recruitment and retention issues will persist. To overcome such challenges, the government and employers need to work together by investing in skills at all levels and ensuring that these skills are put to good use in evolving roles that make the best use of people’s talents.

Gerwyn Davies is a public policy adviser for the CIPD