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The tentative private sector jobs recovery is continuing, but firms are scaling back on temporary staff following the introduction of new agency workers rules, and serious risks to the employment outlook remain. That is according to a survey by the CBI and recruitment specialists Harvey Nash out today (Monday).

Staying the Course, the CBI/Harvey Nash Employment Trends Survey, covers 462 UK companies, and was conducted between August and September 2011. The survey shows that jobs are being created across the private sector, led by small and medium-sized companies, but that pay restraint remains the norm, with nearly half of all firms planning a below-inflation pay award or targeted pay rises.

However, there is a marked difference between permanent and temporary recruitment with prospects for temps deteriorating significantly ahead of the October introduction of the Agency Workers Directive. The CBI is calling for a full review of the impact of this directive to strip out any Whitehall-inspired gold-plating to minimise the damage and retain as many job opportunities as possible.

Dr Neil Bentley, CBI Deputy Director-General, said:

“It is encouraging that firms right across the UK are growing their workforces, especially smaller companies.

“But employers are making hiring plans on shifting sands and there is a risk the tentative private sector jobs recovery could be blown off course by fast-moving economic events at home and abroad.

“We need to be doing all we can to get the UK working, so it is worrying that changes to rules around hiring agency workers are leading to fewer openings for temps.

“There needs to be an early review to minimise the damage this directive is causing and to ensure we retain as many job opportunities as possible.

“We’ve also set out some new proposals for boosting employment, including a Young Britain Credit to encourage more firms to hire unemployed young people.”

Looking at the outlook for recruitment in more detail, the survey found that:

&middot         47% of employers are predicting their workforces will be larger in a year and 19% predict they will be smaller, giving a balance of 28%. This rises to 35% in firms with fewer than 250 employees

&middot         Only 7% of firms are operating a recruitment freeze, compared with 61% during the depths of the recession in 2009

&middot         Ahead of the introduction of the Agency Workers Directive, just 16% of employers are planning an increase in the use of temps, and 20% a reduction, giving a balance of -4% 

&middot         Prospects for graduates are slowly starting to improve, with a balance of 11% of firms planning to take on more university leavers in the next six months.

On pay, the survey shows that restraint remains essential in these challenging economic times, helping preserve jobs and keeping companies competitive. Among the findings are:

&middot         67% of respondents are not planning to match or exceed inflation (RPI) at the next pay review

&middot         Where pay rises are planned nearly half (49%) of employers are opting for a general increase below the rate of inflation or targeted awards for some members of staff

&middot         12% of all firms are planning a pay freeze at the next review, compared to 55% in 2009, and pay freezes are concentrated among those firms with fewer than 50 employees (33%).

Albert Ellis, CEO of Harvey Nash, commented:

“The UK jobs market is holding up, with robust demand for highly-skilled staff in professional services, science and IT, but there is a question mark about whether private sector recruitment can keep pace with public sector job losses.

“With the risk that economic conditions may well become more challenging, companies are understandably taking a cautious approach to pay for next year, particularly in small and medium-sized firms.

“When comparing the UK’s labour market to mainland Europe, it remains relatively favourable, but the implementation of the Agency Workers Directive is further degrading Britain’s standing as a business-friendly environment in which to invest.”

The survey also looks at the impact of the work permit migration cap on firms’ plans. It shows:

&middot         Firms are finding the cap difficult to navigate with increased complexity (62%) and lack of clarity over the rules (50%) most commonly cited

&middot         There is a significant issue with perception of how the cap is working among employers. While the cap is still undersubscribed, a third of employers believe that it is having a negative impact on perceptions of the UK as a good place to invest.

Katja Hall, CBI Chief Policy Director, commented:

“Firms with experience of the cap are frustrated by the complexity and lack of clarity over its administration. More needs to be done to support employers who are having to spend more time than ever on immigration compliance.

“Even more worrying is the perception that the cap is having a negative impact on the UK’s reputation as a good place to invest, despite the fact it is undersubscribed this year. It is critical that the Government ensures the cap remains flexible and businesses are able to secure the talent they need to grow.”

For the first time, respondents were asked about boardroom diversity to give a picture of practice outside the FTSE 350, which is being monitored by Cranfield University. It shows that outside FTSE 350 companies progress is being made, but more needs to be done:

&middot         69% firms in our sample are actively pursuing improvements in the gender diversity of their board

&middot         Many boards have multiple female directors already, 30% of smaller firms and 63% of the larger firms surveyed

&middot         Initiatives to boost the numbers of women among the next generation of business leaders are popular among firms, with 49% of firms operating or considering mentoring schemes and 37% using or considering networking schemes.

Carol Rosati, Director at Harvey Nash and co-founder of Inspire, Harvey Nash’s business network for senior women, added:

“While it is clear more needs to be done to improve boardroom diversity, it is encouraging to see the progress that has been made, particularly in smaller companies.

“It is good to see businesses adapting their approach to developing a new generation of women leaders. Women have much to bring to the board table, and they also have different attitudes and approaches to career progression. For instance, a woman is much less likely to throw her hat into the ring for a job than a similarly qualified man.  

“That is why it is encouraging that almost half of businesses are operating or considering mentoring and coaching schemes for women. These are important tools to help bring about changes in attitudes.”

 A full copy of Staying the Course is attached.

In October the CBI published its proposals to get the UK working, including the introduction of a Young Britain Credit worth &pound1500 for firms taking on an unemployed person aged between 16 and 24 years.  Further details can be found at:


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