With the ongoing economic uncertainties, a number of cost-cutting strategies are being considered by UK firms. According to a study of 300 companies conducted by jobs platform- Indeed Flex, 26% of UK employers stated that they have planned to freeze all recruiting in 2023, and another 27% reported severe cuts to their recruitment budget. A fifth (20%) of respondents said they would not be raising worker compensation due to uncertainty regarding business earnings.
These results come after the International Monetary Fund (IMF) predicted that the UK GDP will fall by 0.6% in 2023, a dramatic decrease of 0.9% from its October prediction. It was also the only G7 nation whose growth was not anticipated for this year.
The Office for Budget Responsibility of the British government, which estimated a 1.4% fall for 2023 last month, is more pessimistic than the CBI.
The Organisation for Economic Co-operation and Development (OECD), however, predicts that Russia’s economy would outperform Britain’s in Europe next year, contrary to the CBI’s prediction. Business investment, according to the CBI, is expected to be 9% lower than it was before the pandemic, and output per worker will be 2% lower.
The CBI urged the government to abolish what it sees as an ineffective ban on building onshore wind turbines, increase tax incentives for investment, and make Britain’s post-Brexit work visa system more flexible in order to prevent this. In most cases, a downturn does lower wage awards. But, the very tight labour market this time around is owing to increased economic inactivity, a skills gap, Brexit, and other factors, which are still driving up recruiting salaries.
The 20% who do not anticipate an increase in wages may be engaging in wishful thinking; seem to recall the analogous study from [Indeed Flex] last year expressed similar unfulfilled promises,” he continued. According to preliminary studies of XpertHR’s January pay awards, the median pay award in the UK appeared to be 6%, with an interquartile range of 3.5-7%.
While it is still too soon to say whether this trend will continue, the most recent data suggests that actual pay awards are somewhat higher than the 5% median estimates made by the research group Incomes Data Research.
Brown said: “It looks like, with a much milder economic contraction now forecast and possibly not a recession this year, plateauing rather than declining pay awards is the more likely outcome. Unemployment has started to increase marginally but at 3.7% is still very low by historical standards. So firms are still facing intense recruitment and retention pressures, whatever their economic state.”
Abrupt reversal of tax-cut plan deepens crisis for Liz Truss
Weak economic growth piles pressure on the UK government as it tries to restore credibility with investors following a run on the pound and a bond market crash in September, triggered by former Prime Minister Liz Truss’ plan to slash taxes while boosting spending and borrowing.
In his first few days on the job, Finance Minister Jeremy Hunt overturned the majority of her proposals. Next week, he’s anticipated to announce significant tax increases and spending reductions in an effort to shorten the country’s debt.
In response to the most recent GDP data not under the impression that it will be a difficult path ahead or that it will not need extraordinarily difficult choices to rebuild economic stability and trust. Yet in order to achieve long-term, sustainable growth, we must control inflation, create financial stability, and reduce debt. There isn’t another option.
Businesses and consumers are likely to encounter more difficulties given that consumer confidence is already at historic lows and that prices are expected to increase further.
