With Brexit Uncertainty Looming, UK Businesses and Employees Lose Confidence in Economy

With Brexit Uncertainty Looming, UK Businesses and Employees Lose Confidence in Economy

The deadline for the UK to withdraw from the European Union is coming up in just two weeks, on March 29. This week, the UK Parliament voted against a deal negotiated between Prime Minister Theresa May’s government and EU leaders, against a no-deal Brexit, and in favor of delaying the Brexit date in order to buy additional time to figure out a solution. Any delay will require the consent of the 27 remaining EU countries, which is not guaranteed, and even with more time, legislators will still face the same tough choices.

As the clock counts down to the deadline, Brexit has created a lot of uncertainty for UK organizations and their employees, especially workers from other EU countries whose future status is up in the air. This uncertainty has done significant damage to UK employees’ confidence in the business environment, Gartner’s latest Global Talent Monitor report indicates:

Employee confidence in the UK business environment has slumped, according to Gartner, Inc. The latest data in Gartner’s Global Talent Monitor report for 4Q18 shows employee confidence in near-term business conditions and long-term economic prospects reaching an index score of 55.6, a decline of 7.5 per cent from an index score of 60.09 in 3Q18. These results follow a worldwide trend that has seen global business confidence sink to its lowest point since the fourth quarter of 2017.

This lapse in confidence was paired with a sharp decline in employees’ active job seeking behavior, which fell by 7.2 per cent from 3Q18. Amid declining perceptions of the job market, coupled with the highly uncertain Brexit outlook, employees’ intent to stay in their current jobs in 4Q18 increased for the first time in 2018, as did their willingness to go above and beyond in their present roles.

UK employers are staring down the uncertainty of Brexit in the context of a tight talent market in which it has become exceptionally challenging to fill critical skills gaps. The Global Talent Monitor data from the final quarter of last year suggests that talent attraction will be a major challenge for employers this year, regardless of what happens with Brexit, as employees take a more pessimistic view of the job market and become more averse to the risks inherent in changing jobs. (Gartner for HR Leaders clients can see all the latest data from our Global Talent Monitor here.)

Uncertainty is a key factor — perhaps the key factor — driving the Brexit panic, as illustrated by the Decision Maker Panel, a survey of 7,500 UK business executives that researchers from the Bank of England, University of Nottingham, and Stanford University have been running regularly to gauge the impact of Brexit on companies. Writing at the Harvard Business Review, the researchers ascribe declines in investment, employment, and productivity to Brexit-related uncertainty:

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UK Employers Grow Optimistic About Raises This Year, But Think Tanks Disagree

UK Employers Grow Optimistic About Raises This Year, But Think Tanks Disagree

In the UK, as in the US, persistent wage stagnation has been a painful long-term consequence of the financial crisis and the Great Recession. A new survey from XpertHR finds that employers there are increasingly optimistic about the raises they will be able to offer this year, predicting an average increase of 2.5 percent, Ashleigh Wight reports at Personnel Today:

A survey of more than 200 private sector employers found that they were more optimistic about the pay increases they plan to offer their staff in 2018 than six months ago, when they expected to offer a 2% pay rise. Of the organisations surveyed, the most common pay award prediction remained at 2%, with 28.9% of employers expecting to offer this level of increase. One in 10 (11.4%) employers forecast a pay increase of 4% or more, while just 5.3% of employers predicted a pay freeze.

In the three months to the end of February, XpertHR found there was a 2.5% median basic pay increase, based on data from 169 pay awards. … XpertHR pay and benefits editor Sheila Attwood said: “It is several years since employers have been so optimistic about prospects for pay rises. If private sector pay awards stick at 2.5% over the course of the year, this will mark the first time since 2012 that increases have been consistently above 2%.”

These findings mirror a survey of US employers conducted in the last quarter of 2017, which registered growing levels of business optimism and predicted that wages could rise 4.27 percent in the coming year, compared to the 3.39 percent figure PwC found in Q3 and just 2 percent a year ago.

Reports issued recently by two leading think tanks paint very different pictures of the economic outlook for UK workers, however. In early November, the Resolution Foundation asserted that the average pay package in Britain in 2022 would still be £20 lower than it was before the financial crisis, according to the Guardian:

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UK’s Gender Pay Gap Narrows, but Wages Fail to Outpace Inflation

UK’s Gender Pay Gap Narrows, but Wages Fail to Outpace Inflation

New figures released this week from the UK’s Office for National Statistics show that real wages there fell in the year to April 2017 by 0.4 percent, the BBC reports:

The Office for National Statistics (ONS) said this was the first fall in three years. It says that although wages rose by 2.2% in the year, inflation rose by more, eroding any gains. The median – middle – amount earned was £550 a week. … The weekly income figure shows the first recorded fall since April 2014, and follows a rise in inflation in the wake of the Brexit vote in June last year.

Earnings, not adjusted for inflation, rose in 2017 by more among the lowest-paid workers. For those in the lowest 10%, full-time earnings rose by 3.5% compared with 2016.

Also, the statistics show the gender pay gap in the UK falling to its lowest level since the government began measuring it 20 years ago: 9.1 percent, down from 9.4 in 2016. That reflects the relative gains British workers made toward the bottom of the payscale, Stephen Clarke, policy analyst at the Resolution Foundation, tells Sky News:

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