–CBI’s Cridland: See No Spare Capacity In Labour Market

LONDON – Although UK businesses are taking a cautious
approach to hiring for the year ahead, there has been a dramatic fall in
the number of companies imposing hiring restrictions and pay freezes,
according to the latest Confederation of British Industry and Harvey
Nash’s Employment Trends Survey.

CBI Director-General John Cridland also told Market News
International that he does not the developments in the labour market
weighing on inflation.

In comments to Market News International, CBI Director-General John
Cridland said he thought that developments in the labour market would
definitely not exert any downward force on inflation, a stance that sits
uncomfortably with the Bank’s August inflation report.

“Pay inflation will be muted. We won’t be going back to the old
days of pay inflation spirals, but you won’t be able to keep the figures
as low as they have been,” he said.

The CBI survey shows the number of firms operating a recruitment
freeze has fallen from a peak of 61% in Spring 2009 to 7% this autumn.
The majority of that 7% maintaining hiring freezes is concentrated in
the public sector and in the construction industry, according to the
survey.

Pay freezes have also thawed, dropping from a peak of 55% of
employers last Spring to 14% now.

But the survey says pay restraint looks set to continue. A fifth of
firms (22%) are planning targeted pay rises for key staff, while 42% are
planning a below-inflation award for all employees.

The CBI/Harvey Nash survey may provide fuel for debate at the Bank
of England’s next Monetary Policy Committee meeting.

MPC members Paul Tucker and Paul Fisher have hinted that they view
the resilience of the UK labour market as evidence that there may not be
as much spare capacity in the UK economy as previously thought.

In an interview this week Paul Tucker noted that “the labour
market hasn’t softened particularly” and described the resilience of the
labour market as a “slight amber light” for raising rates from their
record low of 0.5%

That surprising lack of slack in the labour market was also
highlighted by Andrew Sentance in a speech Wednesday evening as the
latter continued his calls for monetary tightening.

The CBI survey also found that firms are finding it harder to
maintain engagement and morale. Only a third (32%) report high levels of
engagement, with morale also poor, with just over a third of firms (38%)
reporting high levels.

In another sign of increasing worker dissatisfaction, 45% of
employers reported a rise in the number of weak and vexation tribunal
claims in the past year, up from 37% in 2009.

Commenting on the report, Cridland said:

“During the recession, private sector employees adopted a can-do
attitude, accepting that measures such as pay and recruitment freezes
were the alternative to companies going under, and further job losses,”

“Sustaining that spirit of co-operation will be more challenging
now the immediate threat appears to have passed.”

“Firms are cautious about recruitment and pay, given the fragility
of the economy. But they know they can’t afford to take staff for
granted, and must redouble efforts to keep employees on board as they
gear up for growth.”

“This will be especially true in the public sector which, for the
first time, is facing pay and recruitment freezes to reduce the
deficit.”

Albert Ellis, CEO of Harvey Nash, added:

“While business confidence in the sustainability of the recovery
remains fragile, employers will not be recruiting on a broad scale.
However, many organisations are taking a targeted approach to hiring
talent to support their growth strategy, and exploit opportunities where
market conditions are supportive.”

For more information contact UK editorial on 44-20-7862 7492 or
e-mail: wwilkes@marketnews.com.

[TOPICS: M$$BE$]