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09 May 2016

UK employment growth reaches lowest point in two years

A new report has shown that the growth of employment in the UK has hit a two-year low, as businesses are reluctant to take on more staff in the face of economic uncertainty, is4profit.com reports.

According to a study conducted by BDO LLP, the hiring activity of UK businesses has recently reached a two-year low. In fact, the economy has witnessed the largest monthly drop in employment growth since the period following the recession in 2008.

As part of the report, the BDO states that its Employment Index – which monitors the hiring intentions of small UK businesses for the coming six months – has dropped from 104.8 points to just 102.2, the lowest it has been for two years.

The report notes that one explanation for this could be that small businesses in particular are reluctant to add more employees to their books while uncertainty about the UK´s membership in the EU hangs over their heads.

Another factor that could have contributed to this trend is the recent introduction of the National Living Wage, making employment more expensive in general.

However, despite this downwards trajectory, the data could also be interpreted to suggest that small British businesses are starting to experience increased productivity. As Peter Hemington – a partner at BDO LLP – notes, “productivity ultimately determines how much we earn and the UK´s performance in this area has been verging on the disastrous since the recession. Figures earlier this year showed that output per hour here is now 21% below the average of our G7 partners.”

Commenting on the hiring intention figures, Hemington feels they suggest “that UK businesses are starting to look harder at whether recruiting new staff is always the right answer.”

“While this trend will slow the growth of the workforce,” he added, “it could signal the start of a move toward a higher investment, higher productivity economy,” ultimately generating higher living standards and better job opportunities for the UK workforce.

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