OUTLOOK LABOUR MARKET - Spring 2021 - CIPD

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OUTLOOK
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EMPLOYERS
OUTLOOK LABOUR MARKET - Spring 2021 - CIPD
The CIPD is the professional body for HR and people
development. The registered charity champions better work
and working lives and has been setting the benchmark for
excellence in people and organisation development for
more than 100 years. It has more than 150,000 members
across the world, provides thought leadership through
independent research on the world of work, and offers
professional training and accreditation for those working in
HR and learning and development.
Labour Market Outlook Spring 2021

    Report
1
    Labour Market Outlook
2   Spring 2021
3

4

5   Contents
    1 Foreword from the CIPD                                       2
6
    2 Foreword from Adecco                                         4

    3 Key points                                                   5

    4 Recruitment and redundancy outlook                           6

    5 Pay outlook                                                  10

    6 Survey method                                                11

1
Labour Market Outlook Spring 2021

          1        Foreword from the CIPD
1
    The quarterly CIPD/Adecco Labour Market Outlook aims to offer an early indication of
2   future changes to the labour market around recruitment, redundancy and pay intentions.
    The survey is based on a survey of more than 1,000 employers.

3   The latest quarterly CIPD/The Adecco Group Labour Market Outlook survey finds much
    optimism among employers about short-term employment prospects. The survey
    indicates that the overall anticipated demand for labour strengthened considerably
4   between the winter and spring quarters. This was due to both a fall in expected
    redundancies and an increase in recruitment activity.
5
    The report’s net employment intentions balance, which looks at employment intentions
    for the second quarter of 2021, has risen sharply to +27 from +11 in the winter quarter.
6   Indeed, employment intentions are stronger than at any time since the winter 2012/13
    report when this measure was introduced. Employer optimism is evident across all
    three major sectors of the UK economy, including the private sector (+28), voluntary
    sector (+28) and the public sector (+22). This contrasts with the global financial crisis
    recovery, which saw sharp falls in public sector employment levels partly offset by strong
    employment growth in the private sector. Indeed, employer optimism about staffing
    levels is positive in all sub-sectors (Figure 3) of the economy, which points to a strong
    and broad-based employment recovery in the short term. The news will provide some
    reassurance to policy-makers ahead of the closure of the furlough scheme in September.

    The survey data thus suggests that the unemployment rate may be close to peak,
    especially given the reported fall in the supply of overseas workers. The latest official
    labour market statistics highlight a dramatic fall, in particular, in the number of EU-born
    citizens in employment. The figures, which are based on new data using payroll
    employees and Migrant Worker Scan data, reveal that the stock of EU-born workers in
    the UK fell by 7.4% between October–December 2019 and October–December 2020.1
    The CIPD’s view is predicated on the economy not suffering any additional unexpected
    shocks, such as a delay in restrictions being lifted.

    At the same time, despite the evident optimism in this quarter’s survey, it remains
    likely that such strong employment growth will soften during the course of 2021 as the
    aftermath of the pandemic continues to be felt throughout the economy and as the surge
    in demand of labour caused by the easing of restrictions in certain sectors levels off.

    Nonetheless, a new challenge for some employers may emerge in the shape of skill or
    labour shortages, which is also due to the recent fall in supply of overseas workers and
    the recent introduction of migration restrictions. This is likely to start to feed through into
    recruitment difficulties for many organisations seeking both skilled and unskilled labour.
    Employers in sectors that have disproportionately relied on EU migrant workers over the
    last decade, in particular, are likely to need to think more creatively about their workforce
    planning and talent pipelines to ensure that they can continue to access and develop key
    skills. Specifically, there needs to be a mix of attracting new and diverse talent, upskilling

    1
        ONS. Labour market overview, UK Statistical bulletins, Office for National Statistics.

2                                                            Foreword from the CIPD
Labour Market Outlook Spring 2021

    existing staff and a renewed focus on job quality. Some commentators have suggested
    the move to hybrid and remote working can help broaden access to talent based
1   overseas. However, this option will be closed for the vast majority of employers given the
    disproportionate number of EU workers that are employed in labour-intensive sectors such
2   as food processing, hospitality and social care. In addition, employers that use remote
    workers based overseas will require significant tax and legal expertise.

3   The story on wages is also positive, pointing to a relative jump in basic pay for staff,
    especially private sector workers. Employment confidence is therefore reflected in pay
    award expectations, although it should be borne in mind that they are modest by historic
4   standards.

5   Overall basic pay award expectations have risen to 2% from 1% compared with the
    previous report. Median basic pay expectations in the private sector have increased to
    2% from 1.5% since the previous report. By comparison, median basic pay expectations in
6   the public sector in the 12 months to April 2022 will be 0.9%, up from 0% in the previous
    report. The data points to the re-emergence of a two-speed pay market between public
    and private sector workers, as occurred in the aftermath of the last financial crisis, which
    could re-open tensions between trade unions and government. And while ministers
    should take care to ensure that public sector workers are given a fair deal that does not
    harm staff morale or add to recruitment and retention pressures, it is important to bear
    in mind that the lowest-paid workers are currently far more likely to be private sector
    than public sector employees in the UK.

    Overall, despite the welcome jump in pay expectations, it remains to be seen whether
    the pay award increases will be able to match any increases in the cost of living
    caused by higher inflation. The Bank of England’s most recent forecast suggests that
    inflation will increase to 2.3% by Q2 2022.2 Looking ahead, a combination of mounting
                          recruitment difficulties and higher cost of living may soon make pay
                          inflation a greater concern to the Bank of England.

                                   Taken together, the short-term jobs and pay outlook is more positive
                                   compared with the situation three months ago and closely reflects
                                   the levels of employer optimism about jobs and pay reported before
                                   the pandemic.

                                   Gerwyn Davies, CIPD Senior Labour Market Analyst

    2
        Monetary Policy Committee. (2021) Monetary Policy Report. London: Bank of England.

3                                                        Foreword from Adecco
Labour Market Outlook Spring 2021

     2      Foreword from Adecco
1
    A different and unfamiliar course of economic recovery is unfolding as we enter the spring
2   quarter of 2021. The path into the future is unknown; however, the good news in this
    quarter’s Labour Market Outlook is that all the indicators of recovery are positive.

3   Most employers responding to our spring 2021 survey told us they have increased
    intentions to recruit (64% plan to do so this quarter) and far fewer (only 12%), compared
    with the previous 12 months, plan to make any redundancies.
4
    Most promising is that the sectors which suffered so badly during the pandemic have
    some of the highest employment intentions. It’s encouraging to see hotels, catering,
5   restaurants, arts, entertainment and recreation declare ambitious intentions to recruit.

    The net employment intentions balance across all sectors is a strong +27, the highest level
6   since winter 2013. Although the outlook is buoyant, the disruption of Brexit paired with the
    lingering threat of COVID-19 means that we cannot expect recovery to go smoothly, so we
    must all be committed to levelling up and building back better.

    Making the future work for everyone, and especially for those who are looking to enter or
    re-enter the world of work, requires a collective effort from schools, colleges, universities
    and employers. This takes the form of skills development and improving access to
    opportunity. We know that talent is everywhere, but that opportunity isn’t. This time of
    regrowth can be used to level up organisation-wide hiring and development with inclusion
    and social mobility front of mind.

    I hope that the optimism expressed in this report can be channelled into purpose-led
    organisational agendas that will strengthen employers in the face of challenges during
                        recovery. As this report highlights, migration restrictions and a
                        potential pay gap between public and private sector employees may
                        pose setbacks along the way. A purpose-led business that is more
                        innovative, values a healthy work–life balance, provides upskilling and
                        reskilling opportunities and does what’s right for everyone, will be
                        more resilient in the critical months ahead.

                        Alex Fleming, Region President of Northern Europe at Adecco

4                                        Foreword from Adecco
Labour Market Outlook Spring 2021

     3      Key points
1
                                                                                                                +27
    Recruitment and redundancies
2   • The net employment intentions figure for Q2
                                                                                                     +11
      has risen sharply to +27 from +11 in the winter
      2020/21 report. This is due to both a halving                –4            –8          –1
3     of redundancy intentions, down from 20% to                                            Autumn Winter       Spring
                                                                  Spring                     2020 2020/21        2021
      12%, and a rise in recruitment intentions. The               2020      Summer
                                                                              2020
      improvement has again been driven by the
4     private sector, which saw an 18 percentage point
                                                                       Net employment score recovery

      increase since the last quarter.
5                                                                                                        Healthcare
                                                                                                         ICT
                                                                                         Administration
    • Healthcare (+54) and ICT (+37) have continued                                     Construction
6     to increase in employment confidence, retaining                                 Hospitality
      the top spots among the sectors. But the biggest
      climbers this quarter are administration and
      support services, which jumped from +2 last
      quarter to +33, and hospitality from –6 to +29.              Employment confidence by sector

                                                                                       33
    • Redundancy intentions have continued to fall                                                  30

      over the quarter. Just over a tenth (12%) of
      organisations expect to make job cuts in the                            22
      next three months, down from 20% the previous                                                      20

      quarter. The fall takes redundancy intentions to                 16
      below pre-pandemic levels (16%) for the first time.                                                      12

                                                                         Winter Spring Summer Autumn Winter Spring
                                                                        2019/20 2020    2020   2020 2020/21 2021

                                                                  % of employers to make redundancies

                                                                                                                     2%

    Pay
    • Median basic pay expectations have bounced
      back to pre-pandemic levels at 2%, having stayed
      at 1% over the past four quarters.
                                                                             Overall median basic
                                                                              pay expectations

    • While the pay outlook for both the private
      and public sectors has improved, the picture is                                                     2%
                                                                        Private sector
      looking brighter for private sector workers. The                  1.5%
      median basic pay award in the 12 months to                                                          0.9%
      March 2022 will be 2% compared with 0.9% in                       Public sector
      the public sector.                                                    0%

                                                                       Pay outlook in the private and
                                                                               public sectors

5                                             Key points
Labour Market Outlook Spring 2021

                                                  4                     ecruitment and redundancy
                                                                       R
1
                                                                       outlook
2   Overall, employment levels appear to have improved this quarter according to the Labour
    Market Outlook (LMO). For the second consecutive quarter, this quarter’s net employment
3   balance, which measures the difference between the proportion of employers that expect
    recruitment and redundancies to increase staff levels and those that expect to decrease staff
    levels in the second quarter of 2021, is in positive territory and has risen to +27 from +11.
4
          Figure 1: Decomposition of net employment balance over time

5                                                            100
    Decomposition of net employment balance (stacked bars)

                                                                        5
                                                                        4     5         4      5        6      8         5      5            5     4         5        5        5      5       10       5         7         7        6
                                                             90               11                                         11        11        11    13      13      13          10    11                                             9
                                                                        16              16    12        13     14                                                                                                      15
                                                             80                                                                                                                               22     29          25
6                                                            70

                                                             60               57              53                      46       51        51        51                          51    53                                         50
                                                                       50                              49                                                  47      51
                                                                                      49                      48                                                                                                       50
                                                             50
                                                                                                                                                                                              49    45           44
                                                             40

                                                             30

                                                             20                                                        37                                                                                                       36
                                                                       30             30      30        32    30               33        33        33      35                  33
                                                                                                                                                                   31                32                                27
                                                                              27                                                                                                                       21        24
                                                              10                                                                                                                               19

                                                              0
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                                                                                                                                         Quarter
                                                             Increase total staff level                      Maintain total staff level                          Decrease total staff level                            Don’t know

              Base: spring 2021, all employers (n=1,045).

    The rise in relative optimism is being driven by all three broad sectors, most notably the
    private sector, where the net employment balance has increased to +28 from +11. By
    comparison, the net employment balance for the voluntary sector is +28 and +22 for the
    public sector.

6                                                                                                                     Recruitment and redundancy outlook
Labour Market Outlook Spring 2021

     Figure 2: Overall effect of increasing or decreasing staff over the next three months, by sector
                              35
1
                             25

2
                              15
    Net employment balance

3                              5
                               0

4                             –5
                                                                                                    Total
                                                                                                    Private sector

5                            –15                                                                    Public sector
                                                                                                    Voluntary sector

                             –25
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        Base: spring 2021, all employers (n=1,045; private: n=756; public: n=211; voluntary: n=78).

     Figure 3: Net employment balance, by industry

                                                                      Healthcare                                               54

                                               Information and communication                                              37

                                            Administrative and support service
                                                                                                                     33
                                           activities and other service activities

                                                                    Construction                                     32

                                          Hotels, catering and restaurants/arts,
                                                                                                                29
                                                  entertainment and recreation

                                                                       Voluntary                                28

       Business services (for example consultancy, law, PR,
                                                                                                               26
               marketing, scientific and technical services)

                                                Manufacturing and construction                            24

                                                          Finance and insurance                           23

                                                          Transport and storage                           23

                                                                       Education                      22

                                               Wholesale, retail and real estate                     21

                                   Public administration and other public sector                18

                                                            Primary and utilities               18

                                                                  Manufacturing                17

     Base: all bases > 50. For breakdown of base sizes, see Table 3.

7                                                                    Recruitment and redundancy outlook
Labour Market Outlook Spring 2021

    The sectoral figures make equally dramatic reading, with all sectors reporting relatively
    strong employment growth. The net employment balance is highest in the healthcare
1   (+54), ICT (+37) and administration and support services (+33) sectors. Indeed,
    employment growth is in positive territory for all sectors of the economy for the first time
2   since the onset of the pandemic.

    Recruitment growth gathering pace
3   Mirroring the official statistics,3 this quarter’s findings provide further evidence that the UK
    recruitment market may be picking up, with recruitment intentions reaching their highest
    levels since the winter 2019/20 report. Following an increase in recruitment intentions
4   in the autumn 2020 and winter 2020/21 reports, this quarter’s findings show that the
    proportion of organisations planning to recruit in the three months to June 2021 has risen
5   again to 64%. This is up eight percentage points from the winter and up 11 percentage
    points from the autumn. This is also down two percentage points from the winter 2019/20
    report, the last report to be published before the onset of the pandemic.
6
    While recruitment intentions in the private sector (60%) continue to lag behind the
    public sector (81%), hiring in the private sector looks set to accelerate compared with the
    previous quarter (51%). Recruitment intentions are highest in public administration and
    defence (79%), healthcare (73%) and ICT (67%).

    However, the most striking aspect of the data is the sharp increase in hiring intentions
    among the worst-affected sectors. Over two-thirds (66%) of hospitality firms plan to recruit
    in the second quarter of 2021, up from 36% in the winter quarter. Meanwhile, the proportion
    of construction firms with recruitment intentions has increased to 59% from 44% during the
    same period, while hiring intentions among administration and support service activities’
    employers have jumped from 45% to 63%. More than two-thirds of voluntary sector
    respondents (67%) are planning to recruit, which is consistent with recent reports.

    Figure 4: Recruitment intentions, by broad sector (%)

                                                                  90
    % of employers planning to recruit in the next three months

                                                                  80

                                                                  70

                                                                  60

                                                                  50

                                                                  40

                                                                  30                                                                     Total
                                                                                                                                         Private sector
                                                                                                                                         Public sector
                                                                  20                                                                     Voluntary sector
                                                                       Spring Summer Autumn Winter Spring Summer Autumn Winter Spring
                                                                        2019   2019   2019 2019/20 2020 2020      2020 2020/21 2021

                     Base: spring 2021, all employers (n=1,045; private: n=756; public: n=211; voluntary: n=78).

    3
                           O
                            NS. Labour market overview, UK: March 2021, Office for National Statistics.

8                                                                                                   Recruitment and redundancy outlook
Labour Market Outlook Spring 2021

    Redundancy intentions show further sharp fall
    While recruitment intentions have ticked up, the proportion of employers intending to
1   make redundancies continues to fall. Just over a tenth (12%) expect to cut jobs during the
    next three months, down from 20% in the previous quarter. The fall is consistent across all
2   three major sectors of the UK economy. Indeed, redundancy intentions have fallen below
    pre-pandemic levels (Figure 5).

3   The volume of these redundancy intentions represents on average 15% of the workforce,
    which is broadly consistent with previous reports. Additionally, the proportion of those
    who cannot give an answer as to whether they intend to make redundancies or not
4   has decreased by three percentage points (16%), suggesting that there is slightly less
    uncertainty among employers than in the recent past.
5
    Figure 5: Redundancy intentions, by broad sector (%)

6                                                       40

                                                        35
     % planning redundancies in the next three months

                                                        30

                                                        25

                                                        20

                                                        15

                                                        10

                                                                                                         Total
                                                                                                         Private sector
                                                         5                                               Public sector
                                                                                                         Voluntary sector

                                                        0
                                                             Spring 2020   Summer 2020    Autumn 2020    Winter 2020/21     Spring 2021

                                                                                            Quarter
    Base: spring 2021, all employers (n=1,045; private: n=756; public: n=211; voluntary: n=78).

9                                                                                 Recruitment and redundancy outlook
Labour Market Outlook Spring 2021

                         5                            ay outlook
                                                     P
1
     Figure 6: Employers’ median basic pay expectations, by business sector

2                                             2.5

3
                                              2.0
     Predicted annual basic pay awards (%)

                                                                                                                                                                2.0

                                                                                                                                                                1.6
                                               1.5
4
                                              1.0                                                                                                               1.0

5                                                                             Public sector
                                                                              Private sector
                                              0.5
                                                                              Voluntary sector

6                                             0.0
                                                                              Overall net

                                             –0.5
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                    Base: spring 2021, all employers (n=1,045; private: n=756; public: n=211; voluntary: n=78).

     Expected scale of organisational pay reviews
     More than three-quarters (77%) of employers surveyed intend to review their wages over
     the next 12 months. Around three in ten (29%) employers surveyed intend to review wages
     between April and June 2021. Just over a fifth (22%) expect this to be between January
     and March 2022. However, the proportion of employers that plan to postpone carrying out
     a pay review in the next year remains relatively high (24%).

     In a break with the trend in previous reports, pay settlements look set to increase relatively
     sharply in the 12 months to March 2022. Employers say that the median basic pay increase
     in their organisation (excluding bonuses) will be 2%, up from 1% in the winter 2020/21
     quarter. Pay settlements therefore look set to return to pre-pandemic levels.

     The pay outlook for private sector workers over the coming 12 months is brighter than
     the outlook for public sector workers. The median basic pay award in the private sector in
     the 12 months to March 2022 will be 2%, which compares with 1.5% in the winter 2020/21
     quarter. By comparison, basic pay expectations in the public sector have increased from
     0% to 0.9% during the same period.

     Overall, among those who report an expected increase, decrease or pay freeze in the
     next 12 months, the proportion of employers predicting a pay freeze is 22%, roughly half
     the proportion of employers that were planning to introduce wage freezes in the winter
     2020/21 quarter (41%). The fall in the share of organisations intending to freeze pay is
     particularly acute among private sector firms, down from 37% in the winter quarter to 16%
     in the current spring report.

10                                                                                                              Pay outlook
Labour Market Outlook Spring 2021

     We also asked survey respondents whether they had made a basic pay award decision in
     2021. And consistent with the other survey data, the median basic pay award since the start of
1    2021 was also 2%. The median basic pay award was 2% across the private, public and voluntary
     sectors. However, with half (50%) of organisations reporting that they have not conducted a pay
2    review in 2021, considerable caution needs to be applied when interpreting this data.

     Figure 7: Distribution of forward-looking pay changes (%)
3
                      35
                                                                                                                                         31

4                     30

                      25
                                                                                                         22
5
     % of employers

                                                                                                                               21
                      20

                      15
6                                                                                                                                                  11
                                                                                                                                                         10
                      10

                       5
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                                                             –2

                                                                          –1

                                                                                                                          –1
                           –4

                                                                                                  fre

                                                                                                                                      0–

                                                                                                                                                0–
                                                                                         .1–

                                                                                                               1–
                                                                           .0

                                                                                                                         1.0
                                                          .0
                                         .0

                                                                                                               0.
                                                                                                   y

                                                                                                                                    2.
                                                                                      –0
                                                                        –1

                                                                                                                                              3.
                                                       –2
                                      –3

                                                                                                 Pa

                                                                                             Bands of pay change

     Base: spring 2021, all employers who report an expected increase, decrease or pay freeze in the next 12 months (n=425).

            6               urvey method
                           S
     All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 1,045
     senior HR professionals and decision-makers in the UK. Fieldwork was undertaken during
     2–18 April. The survey was carried out online. The figures have been weighted and are
     representative of UK employment by organisation size and sector.

     Weighting
     Rim weighting is applied using targets on size and sector drawn from the Business Population
     Estimates for the UK and Regions 2019. The following tables contain unweighted counts.

     Table 1: Breakdown of the sample, by
     number of employees in the organisation                                                           Table 2: Breakdown of sample, by sector

     Employer size band                                                 Count                          Sector                                 Count
      2–9                                                                   184                        Private sector                            756
      10–49                                                                205                         Public sector                              211
      50–99                                                                     81                     Third/voluntary sector                     78
      100–249                                                               103                        Total                                   1,045
      250–499                                                                   92
      500–999                                                                   69
      1,000 or more                                                             311
      Total                                                              1,045

11                                                                                         Survey method
Labour Market Outlook Spring 2021

     Table 3: Breakdown of sample, by industry
1    Industry                                                                     Count

     Voluntary                                                                      78
2    Manufacturing and production                                                   153
     Manufacturing                                                                  82

3    Construction                                                                   52
     Primary and utilities                                                           19
     Education                                                                      117
4    Healthcare                                                                     67
     Private sector services                                                       540

5    Wholesale, retail and real estate                                              115
     Transport and storage                                                          34
     Information and communication                                                   51
6
     Finance and insurance                                                          66
     Business services (for example consultancy, law, PR, marketing, scientific     107
     and technical services)
     Hotels, catering and restaurants/Arts, entertainment and recreation            70
     Administrative and support service activities and other service activities     97
     Public administration and defence                                               81
     Police and armed forces                                                         15
     Total                                                                        1,045

     Table 4: Breakdown of sample, by region

     Region                              Count
     North-east of England                  31
     East Midlands                         65
     West Midlands                         57
     Scotland                              68
     London                               169
     South-west of England                 83
     East of England                       52
     Wales                                 32
     South-east of England                 133
     North-west of England                 73
     Yorkshire and Humberside              63
     Northern Ireland                       13

12                                                Survey method
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14Issued: May 2021 Reference: 8143 © CIPD 2021
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