GROWTH FOR EVERYONE CBI/ACCENTURE EMPLOYMENT TRENDS SURVEY 2014

Transcription

1 GROWTH FOR EVERYONE CBI/ACCENTURE EMPLOYMENT TRENDS SURVEY 2014 Sponsored by

2 CBI contact Fionnuala Horrocks-Burns Policy adviser CBI Cannon Place 78 Cannon Street London EC4N 6HN Accenture contact Joanna Brown Accenture 1 Plantation Place 30 Fenchurch Street London EC3M 3BD T: +44(0) E: fionnuala.horrocks-burns@cbi.org.uk T: +44(0) E: joanna.brown@accenture.com About the sponsor Accenture is a global management consulting, technology services and outsourcing company, with more than 305,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0bn for the fiscal year ended Aug. 31, Its home page is

3 CONTENTS Foreword by Katja Hall, CBI 4 Foreword by Olly Benzecry, Accenture 5 Overview 6 1. The employment landscape The 2014 employment trends survey More job opportunities opening up in Ensuring the UK remains competitive Tackling barriers to work for young people Maintaining the momentum on positive employee relations Maximising future talent Boosting flexible working practices Upholding flexibility within the UK s regulatory framework 46 Footnotes 54

4 4 Growth for everyone: CBI/Accenture employment trends survey 2014 FOREWORDS As the economic recovery becomes more soundly based, businesses are increasingly optimistic. For the first time since the financial crash of 2008 the perception of the UK as a competitive place to create jobs is positive with firms seeing the UK as a place to invest and grow their business. The story of the recovery so far has been one of employment growth but limited wage rises, both of which have been reflected in previous editions of this survey. Last year, we saw a thaw coming in the pay freezes and low rises that have dominated since 2009, and that has been borne out this year with those remaining in regular work through the year seeing a return to inflation-matching and above-inflation rises. Overall wage inflation remains low, however, as we still have almost two million people unemployed and those with more broken employment histories are still seeing low or no rises. This year s survey suggests that this picture may be starting to change though. The great success of the UK over the past five years has been flexibility ensuring unemployment didn t rise to the levels many feared in the recession, and getting us back on the path to job creation quickly. In total 95% of businesses believe a flexible labour market it either vital or important to the future of the UK. It is disappointing, therefore, to see politicians of all political hues increasingly talking about new controls and regulations, whether that is on employment law, pay or immigration. Such steps are not in the longterm interest of workers or businesses. Businesses across all sectors have identified raising productivity and addressing skills shortages as crucial to ensuring the recovery continues and is felt by all. Concern about the level of skills has become the top threat to business identified in the survey this year. This needs to be tackled in two ways: aligning vocational education to employer needs for young people and adults and better practice in firms on people management, development and progression, and skills utilisation to boost productivity. Katja Hall CBI deputy director-general

5 Growth for everyone: CBI/Accenture employment trends survey The results of this year s survey underline employers confidence in the recovery and what might be described as realistic optimism. Despite the global market and political uncertainties that exist, businesses across the UK are reflecting they are employing more people and more of this employment is full time. It is also good to see, in the spirit of inclusive growth, that many plan pay growth at, or ahead of, the cost of living. While the employment prospects for many improve, including graduates, it remains apparent that critical to sustaining and sharing growth is the availability of the right skills. Put another way, businesses cite the skills gap as the key barrier to growing their business and success. It is clear that to maintain the growth in our economy and increase investment we need a workforce that is fit for purpose and able to compete globally. While much has been done, the pattern across the UK remains piecemeal. We must become better at replicating and formalising the relationship and engagement between employers, educators and trainers closing the gap between the skills we have and those we need. Nowhere is this more critical than in the area of digital skills, as the link between digital capability, productivity and economic growth becomes ever more apparent. It is also clear that business and educators recognise that they need to be more flexible in the paths by which talent is developed and can enter the workforce. This will lead to both an increased speed to getting the skills that are needed as well as more inclusive opportunity. Accenture is delighted to remain part of the CBI s research into employment trends and the opportunities and challenges that exist. Much has been achieved in the last few years, but as ever, more can be done. A truly modern, highly skilled workforce with the skills to achieve their ambitions and meet the needs of businesses must be top of everyone s agenda as we move forward. This requires business to play its part at the heart and soul of the process to make growth work for everyone. It is clear from this survey that business wants to be part of the solution it is now a matter of getting better at how this happens. Oliver Benzecry Accenture UK managing director

6 6 Growth for everyone: CBI/Accenture employment trends survey 2014 a OVERVIEW The employment trends survey 2014 The survey was conducted between August and October 2014 There were 323 respondents, employing more than 1.25 million people between them Respondents came from businesses of all sizes and sectors across the UK The survey was completed by senior executives. In small and medium-sized companies this tended to be the managing director, chief executive or chairman. In larger firms, it was the human resources director or equivalent. More job opportunities opening up in 2015 Half of employers (50%) expect their workforce to be larger in 12 months time, while just 12% expect the workforce to be smaller, producing a positive balance of +38% of businesses looking to recruit additional employees Private sector jobs growth is expected in every part of the UK, with the positive balance of businesses expecting to grow their workforce ranging from +36% in Northern Ireland to +49% in the north west The number of permanent jobs is expected to increase faster than temporary positions, with a positive balance of +28% of businesses expecting to expand permanent hiring and +16% expecting to grow their temporary workforce over the coming year Job prospects for graduates are rapidly improving, with a positive balance of +30% of businesses planning to increase their graduate hiring over the next 12 months compared with a balance of +20% in our 2013 survey Openings for apprentices are also increasing, with a balance of +33% of businesses looking to recruit additional apprentices in 2015 Competitive pressures and weak productivity limit the scope for pay growth, but over half of businesses intend to raise pay at least in line with the RPI measure of inflation in the coming year. The proportion of firms planning a pay freeze at their next pay review is very low (8%) by the standards of recent years Three quarters (74%) of businesses think that an independent Low Pay Commission should continue to take an evidence-based approach to recommending national minimum wage rates While business see the living wage campaign as an important reminder of cost of living pressures, paying it must be a voluntary decision to avoid job losses. Ultimately, to be sustainable, pay needs to reflect productivity, with people progressing to better pay on the basis of skills. Ensuring the UK remains competitive Assessments of the UK as a place to invest and do business have improved significantly over the past 12 months, jumping from a negative balance of -2% to +22% There remains work to be done to cement this positive assessment as we look ahead: the balance of respondents expecting the UK to become a better location for business in five years time has dropped from +31% in 2013 to +25% this year

7 Growth for everyone: CBI/Accenture employment trends survey Concerns about low levels of skills (63%) have overtaken employment regulation (61%) as the biggest perceived threat to the UK s competitiveness as a place to employ people Businesses recognise the long-term nature of the issue, with low levels of skills anticipated to remain the biggest threat in five years time (by 54% of respondents) Concerns about regulation (53%) and labour costs (25%) are also seen by employers as risks to future competitiveness With less than one in ten (7%) businesses reporting they have no need for digital skills, developing greater digital competence is essential to enable UK businesses to compete internationally. Tackling barriers to work for young people New job opportunities for young people will open up over the coming year, with almost three quarters (73%) of businesses expecting to have entry roles suitable for young people aged Despite some improvements in recent years, without a clear programme of careers advice and guidance in schools, too many young people find they are poorly prepared for working life: the main obstacles facing young people are lack of the right attitude and behaviours (58%) and lack of knowledge and skills (54%) Businesses cite the most important actions to improve young people s employability as more relevant high quality vocational educational options (48%), better links between business and education (47%), improvement in skills (41%) and better careers advice (37%) While over half of respondents (58%) are informally engaging with schools, there is more to be done to develop a systematic approach. For example, less than a third (31%) of businesses are involved in structured outreach programmes with schools. Maintaining the momentum on positive employee relations The proportion of businesses assessing the employee relations climate as cooperative or very cooperative has increased to a new high of 76% (up from 72% in 2013). Just 2% report an adversarial climate In those firms which recognise a trade union for collective bargaining the balance reporting a positive employee relations climate was lower (at +52%) than in other businesses (+84%) Nearly three quarters of businesses (73%) anticipate their employee relations climate remaining cooperative over the next 12 months Employee morale is also at a new high, with 55% of respondents describing their organisation s morale levels as high or very high, up from 49% in 2013 From the employers perspective, the major benefits of high levels of engagement are seen as improvements in productivity and performance (80%) and increased customer/client satisfaction (65%) Maintaining this positive climate is a key focus for businesses over the next 12 months, with high levels of engagement one of the two top workforce priorities, together with improving leadership skills (cited by 44% and 50% of respondents respectively). Maximising future talent Considering diversity in its broadest sense, just over half of firms (52%) report at least some barriers in developing a more diverse workforce The key challenge faced by business is an insufficient number of people from diverse backgrounds in their sector or profession (61%). This is particularly acute in certain sectors such as manufacturing and construction (both 81%), highlighting the need to change attitudes and attract more young people from diverse backgrounds into non-traditional roles and careers

8 8 Growth for everyone: CBI/Accenture employment trends survey 2014 Other obstacles to greater diversity include working practices and work culture (both 20%), pointing to the importance of businesses reviewing policies to tackle unnecessary barriers In relation to gender diversity, businesses are stepping up to the challenge and are taking steps to boost diversity including the implementation of family friendly policies for employees returning from parental leave (64%), improvements in the recruitment process (35%) and targeted advertising or head-hunting when filling vacancies (35%). Boosting flexible working practices Almost all businesses (95%) believe flexibility is vital or important to the competitiveness of the UK s labour market and the prospects for investment and job creation The top three reasons why a flexible workforce matters to UK businesses are responding to growth opportunities (82%), managing fluctuating demand (81%) and creating employment opportunities (61%) Flexibility in the workplace takes many forms flexibility over location for work is most widely offered by 84% of businesses, followed by non-standard hours schemes (81%) and multiskilling of employees (80%) The use of temporary workers/freelancers/ contractors has dropped sharply to two thirds of businesses (67%), possibly driven by a combination of greater economic confidence enabling businesses to add to permanent positions and wariness about possible future restrictions on flexible contracts Obstacles to implementing flexible working practices include practical problems posed by company infrastructure (59%), the mind-set of some managers (52%) and the need to ensure continuity in business activities (44%) Agency working is a vital component of the UK s flexible labour market. Tampering with the existing regulations to impose new restrictions such as abolishing the so-called Swedish derogation would result in 41% of businesses reducing their use of agency workers but just 13% would increase hiring of permanent employees instead. Upholding flexibility within the UK s regulatory framework The individual working time opt-out remains an essential element of the UK s flexible labour market: more than seven in ten (72%) businesses report its loss would have an impact on them, with most of these saying the impact would be significant or severe The most widespread impact from loss of the opt-out would be the negative effect on employee relations (55%) followed by reduced capacity for businesses to respond to growth opportunities (47%) Businesses are facing the risk of significant additional costs from tribunal cases challenging the normal calculation of holiday pay. Eight in ten (80%) businesses report a negative impact if the calculation is changed with over a quarter (26%) reporting a severe impact In terms of impact, the major costs of any backdated liabilities would be the major concern to business (71%), but the ongoing increased costs of employment (69%) and additional bureaucracy and administration costs (68%) are just as important Businesses report a drop in the number of employment tribunal claims over the past year, with less than one in four (23%) receiving any claims in the past year, down from 39% in 2013 Despite the reduction in the number of cases going to tribunal, businesses report there has been little change in the time taken to resolve tribunal claims with three quarters (73%) believing it has stayed the same or increased Many businesses (23%) remain uncertain about how best to manage the retirement of older workers following the abolition of the Default Retirement Age in 2011.

9 Growth for everyone: CBI/Accenture employment trends survey Respondents to this survey employ over 1.25 million employees collectively

10 10 Growth for everyone: CBI/Accenture employment trends survey 2014 SECTION 1 The employment landscape Recovering from the recession has taken time. But the UK economy s positive progress has continued in 2014, with output now above its pre-crisis peak. Renewed growth has been driven primarily by the services sector, although manufacturing and construction too have been picking up. The flexible nature of the UK s labour market has proved its worth, with employment rising yet again, driven by job generation in the private sector. Challenges clearly remain, however, with weak productivity acting as a drag on pay and living standards. Key points As the economic recovery has become ingrained, output has surpassed its pre-recession peak. But the UK economy is still facing headwinds, including political and economic uncertainties at home and abroad The UK labour market has continued to strengthen and, thanks to job creation in the private sector, there are now more people in work then before the crisis began The UK has performed well in comparison to other leading economies: the employment rate stood at 70.8% in 2013 compared to 63.5% in the euroarea, while the UK s unemployment rate of 7.6% in 2013 was well below the EU average of 11.9% Young people have been benefiting from a stronger labour market, but rising youth unemployment even before the downturn indicates more action is needed to prepare young people for working life Productivity growth has continued to disappoint. Productivity is still 16% lower than it would have been had it continued to grow at the same pace as before the recession. Turning this around is essential to enable sustainable increases in pay. The recovery is on a firmer footing The UK economy was hit hard in when the financial crisis began and it has been a long road to recovery since. But the economy is now growing at a good rate and has fared well in comparison to its G7 counterparts. GDP grew by 0.7% in the third quarter of 2014, and output is now 3.4% higher than before the downturn. But the UK economy faces headwinds which could put the sustainability of the recovery at risk. In the eurozone growth has continued to disappoint, contracting in Germany and grinding to a halt in Italy and France. Together with the danger of a slide into deflation, this has prompted the IMF to warn of a 40% risk that the eurozone could fall back into recession. 1 With net trade already contributing little to the recovery any further economic disappointments, in the Eurozone and the global economy, could present a risk to our export growth. On top of this, productivity growth, a key determinant of growth and pay, remains worryingly weak. Output per hour is still 16% below where it would have been had it continued to grow at the same pace as before the crisis. The CBI is forecasting GDP growth of 3.0% in 2014, 2.5% in 2015 and 2.5% in CPI inflation is expected to remain below target this year and next (1.5% in 2014 and 2015) before rising to 2.0% in The UK s labour market has continued to strengthen Just as the UK s flexible labour market saved jobs during the downturn, so it has also helped create them in the recovery. The number of people in employment increased by 694,000 in the past year and there are now more people in work than before the crisis began. The employment rate has also continued to improve and recently regained its pre-downturn level. 3 The private sector has been the driving force behind this robust employment growth. In the past year alone 704,000 more people found work with a private sector business. This more than offset declining employment in the public sector.

11 Growth for everyone: CBI/Accenture employment trends survey Exhibit 1 The number of people working for an employer is rising Change in employment compared to first quarter of 2008 (000s) 1,500 1, Employees Self-employed Total employment Source: ONS with more people finding work with an employer Even before the recession, the number of people choosing to work for themselves was rising. But as the downturn took hold and fewer jobs were available with employers, the number of self-employed started to increase at a faster pace. As the economy is regaining its health, more and more people are finding work with a business (Exhibit 1). In the past year the number of employees increased by 454,000, while the number of people working for themselves rose more slowly, up by 279,000. and taking up full-time work An increased number of people working for themselves was not the only way the UK economy adapted to cope with the downturn. By working with their employees businesses also saved as many jobs as possible by increasing part-time working. This trend has now started to reverse too as the recovery has strengthened. Full-time working is on the up. In the past year 85% of the increase in employment was among people working full-time. There is still some ground to be made up though. While the number of people who couldn t find a full-time job fell by 125,000 over the last year, the proportion of people working part-time who want to work full-time is still seven percentage points higher than before the recession began. Using and building skills in the workplace is the best way to increase the chances of moving up the career ladder. So people in part-time work will be well placed to take advantage of fulltime positions as they become available something business will be increasingly able to offer as the economy continues to improve. After a fall in vacancies during the initial stages of the crisis, the number of positions on offer is now on the up (Exhibit 2). Exhibit 2 Vacancies (Q1 2008= 100) Source: ONS

12 12 Growth for everyone: CBI/Accenture employment trends survey 2014 Exhibit 3 International comparisons of employment rates (%) 75 Exhibit 4 International comparisons of unemployment (%) euro area Germany Ireland Spain France UK US Source: Eurostat euro area Germany Ireland Spain France UK US Source: Eurostat The UK is doing well on employment compared to international peers The UK s strong performance on employment becomes clear when we look at how other leading economies have fared (Exhibit 3). The UK employment rate in 2013, the latest date for which comparable data is available, was 70.8%. This was significantly higher than the average for the euroarea as a whole (63.5%) and higher than in the US (67.4%). Only Germany had a higher employment rate than the UK (73.3%). Progress over the past 12 months is likely to have closed this gap still further. Mirroring the UK s robust growth in employment, the picture on unemployment is also a positive one. When the UK first entered recession our unemployment rate was lower than in other leading economies such as Germany and France. This positive performance was sustained during the downturn, with the UK unemployment rate remaining consistently below that seen elsewhere (Exhibit 4). By 2013, unemployment in the UK stood at 7.6%, significantly below the average for the euroarea of 11.9% and well below the rates in Spain, Republic of Ireland and France. Only Germany outperformed the UK with an unemployment rate of 5.3% in 2013, the latest year for which comparable data has been published. 4 Since then, more recent data for the UK shows that unemployment has continued to fall fast. It dipped below the two million mark for the first time in six years in the three months to September 2014, meaning that only 6.0% of those aged over 16 are now out of work and looking for work. 5 Young people have benefit from a strengthening labour market During an economic downturn it is often young people who are most affected. The experience in the UK was no exception. Unemployment among those aged 16 to 24 topped one million in the three months to November 2011, a youth unemployment rate of 22.5%. This is a worry as the scaring effects of a period of unemployment early on in working life are well established, increasing the risk of further periods of unemployment and reducing future earnings potential. More recently, however, young people have seen the benefits of a strengthening labour market. Since mid-2013 youth unemployment has dropped markedly (Exhibit 5). Indeed, in the past year, the decline in youth unemployment accounted for 46% of the fall in Exhibit 5 Youth unemployment (%) Source: ONS

13 Growth for everyone: CBI/Accenture employment trends survey total unemployment, reducing the number of young people that are out of work and looking for work to 737,000. Excluding unemployed young people in fulltime education, this number falls further to 489, These are encouraging trends. But youth unemployment was rising even before the recession began, indicating there are more ingrained challenges that need to be tackled beyond an upturn in the number of jobs on offer in the economy. Enabling young people to get into work and stay in work starts with structured preparation. This requires an education system that supports the development of rounded and grounded young people who have a bit of work experience under their belt and a good idea of the career path they would like to follow. It also means making sure we have a system which sets every young person off on a clear, valued route to success, regardless of whether that path is vocational or academic in nature. And there s a role for business too in helping young people get their foot on the career ladder. By providing personalised feedback to all candidates attending interviews and assessment centres and a general list of top tips for those who don t get that far, young people can learn from their experiences and improve their chances of success next time around. 7 To boost living standards we need to improve productivity The UK economy has been through a tough period. While the jobs market held up relatively well, productivity the value added to the economy every hour worked has been badly affected. The UK needs to raise productivity growth if it is to continue to compete on the global stage and improve the living standards of those in work by securing sustained wage growth. If we are to reverse the 7% fall in the purchasing power of average pay seen since the downturn began, this is an issue we need to tackle. One of the reasons why productivity growth has been so weak is that, despite the UK economy producing a little more now than it did before the crisis, more people are at work to produce it. Other reasons which help to explain this productivity puzzle include firms having to work harder than usual to win and deliver work, impaired access to finance during the crisis which limited the potential for firms to grow during the recovery and lower levels of investment in capital Exhibit 6 Productivity growth compared to a continuation of pre-crisis trend Output per hour worked Real GDP 16% Pre-crisis trend in output per hour worked Source: ONS such as machinery or computers. Although output is now rising, productivity is still 16% lower than it would have been had it continued to grow at the same pace as before the recession (Exhibit 6). This won t be an easy nut to crack. In the CBI s recent report A better-off Britain we highlight the need for businesses to take a long-term approach to raising employee value-added, and make it a firm priority. While higher spending on new equipment and technologies can help, in the service sector, for example, raising productivity is more about innovation in business organisation and investment in activities like design, branding and advertising. Businesses need to ensure that managers have the support and the skills they need to develop staff and look at the way that jobs are designed. We should also apply the lessons of our industrial strategy more widely: business leadership, collaboration with customers and suppliers, and the spread of best practice can help raise productivity in a broader range of sectors. And government has a part to play. The policy environment influences many of the factors that determine how fast productivity grows over the long run levels of competition, regulations, the skills system and incentives to encourage firms to invest and export. The government could do more to support firms of all sizes but especially small and mediumsized firms by removing the barriers that can prevent the most productive firms from growing, such as accessing finance and highlighting export support. 8

14 14 Growth for everyone: CBI/Accenture employment trends survey 2014 SECTION 2 The employment trends survey 2014 Now well into its second decade, the CBI s employment trends survey has charted the shifting patterns of employment and workplace practices under successive governments and through fluctuating economic conditions. For the past 17 years the survey has monitored trends through periods of growth, the economic crash of and the subsequent recovery. The 2014 edition of the survey maps business opinion as the economic recovery becomes more soundly based and looks at the employment opportunities and challenges ahead. This year s survey has been conducted in partnership with Accenture, the technology, consulting and outsourcing specialists. The survey was carried out between August and October There were 323 respondents in total, from firms employing more than 1.25 million people between them. The combined workforce of respondents was equivalent to over 4% of those in employment in the UK. 9 The survey was completed by a senior executive in each organisation. In larger firms it tended to be the human resources director or equivalent. In small and medium-sized enterprises in was usually the managing director, chief executive or chairman. Sectoral analysis There was a wide spread of responses across all sectors (Exhibit 7). As in previous years, manufacturing firms made up the largest single category, accounting for about one in five respondents (19%). Professional services firms (13%) were also well represented. Organisations classed as other services (11%) or other (13%) together accounted for nearly a quarter of responses. These included higher education, housing and healthcare providers, aviation and power generation companies and waste management firms. Businesses in the construction sector, the finance sector, retail and hospitality, and transport and distribution each accounted for 7% of respondents. Exhibit 7 Respondents by economic sector (%) Other services 11% Energy & water 3% Banking, finance & insurance 7% Public sector 7% Other 13% Transport & distribution 7% Manufacturing 19% Professional services 13% Construction 7% Science/hi-tech & IT 6% Retail & hospitality 7% Respondents by company size Businesses of all sizes took part in the survey. Small businesses, employing up to 49 employees, represented just over one quarter of respondents (27%) while one in eight respondents (12%) represented large businesses employing more than 5,000 employees (Exhibit 8). Overall, medium-sized businesses (MSBs) employing between employees accounted for around a third (34%) of participants. While MSBs make up a relatively small proportion of the UK business landscape, they are responsible for earning 22% of private sector revenue and employing 16% of all employees. 10

15 Growth for everyone: CBI/Accenture employment trends survey Exhibit 8 Respondents by company size (%) Exhibit 9 Respondents employing staff in each region (%) % % % Scotland 28% % % The majority of private sector businesses in the UK fall into the official definition of small and medium sized enterprises (SMEs) organisations with fewer than 250 employees. 11 Looking at the proportion of SME businesses taking part, nearly half (48%) of respondents were from firms of this size category. Larger firms, those with 250 or more employees made up the balance of respondents (52%). Respondents by region The majority of respondents had employees based in several regions of the UK. Many respondents had employees based in London, with two fifths (40%) having at least some employees located there (Exhibit 9). After London, the most common locations where employees were based were the south east (34%), the south west (32%) and the north west (32%). In all, two in five participant businesses (40%) had at least some employees based in one or more of Scotland, Northern Ireland or Wales, where devolved parliaments or assemblies have a strong role in areas of business policy. Northern Ireland 25% Wales 25% North west 32% North east 24% West Midlands 31% South west 32% Yorks & Humber 29% East Midlands 28% East of England 31% South east 34% London 40%

16 16 Growth for everyone: CBI/Accenture employment trends survey 2014 SECTION 3 More job opportunities opening up in 2015 Private sector employment has grown rapidly over the past three years. And the growth in jobs looks set to continue into 2015, with half of businesses expecting to expand their workforces in the coming year. Firms anticipate creating more permanent jobs in addition to more openings for both graduates and apprentices. As the recovery becomes further ingrained, most businesses expect to be able to raise pay in the coming year but the rate of increase will need to reflect productivity, growth and a tough competitive environment. Key findings: Half of employers (50%) expect their workforce to be larger in 12 months time, while just 12% expect the workforce to be smaller, producing a positive balance of +38% of businesses looking to recruit additional employees Private sector jobs growth is expected in every part of the UK, with the positive balance of businesses expecting to grow their workforce ranging from +36% in Northern Ireland to +49% in the north west The number of permanent jobs is expected to increase faster than temporary positions, with a positive balance of +28% of businesses expecting to expand permanent hiring and +16% expecting to grow their temporary workforce over the coming year Job prospects for graduates are rapidly improving, with a positive balance of +30% of businesses planning to increase their graduate hiring over the next 12 months compared with a balance of +20% in our 2013 survey Openings for apprentices are also increasing, with a balance of +33% of businesses looking to recruit additional apprentices in 2015 Competitive pressures and weak productivity limit the scope for pay growth, but over half of businesses intend to raise pay at least in line with the RPI measure of inflation in the coming year. The proportion of firms planning a pay freeze at their next pay review is very low (8%) by the standards of recent years Three quarters (74%) of businesses think that an independent Low Pay Commission should continue to take an evidence-based approach to recommending national minimum wage rates While business see the living wage campaign as an important reminder of cost of living pressures, paying it must be a voluntary decision to avoid job losses. Ultimately, to be sustainable, pay needs to reflect productivity, with people progressing to better pay on the basis of skills. Strong private sector jobs growth remains in prospect UK businesses have been major generators of jobs since the recession of Our 2013 survey found just over half (51%) of respondent businesses expected to increase the size of their workforces over the months ahead. This year s results maintain this positive picture, with half (50%) of all respondents expecting their workforces to be larger in 12 months time (Exhibit 10). As in 2013, only one in eight businesses (12%) expects their workforce to be smaller in 12 months time and just over a third (37%) anticipate no change. Overall this produces a positive balance of +38% of companies expecting to have more employees in a year s time. Job creation will be spread fairly evenly across all sizes of businesses, with 52% of SMEs and 48% of larger businesses expecting to take on more people. MSBs are expecting to lead the employment expansion, with 55% anticipating a larger workforce in a year s time. With less than one in ten (8%) expecting reductions, this produces a positive balance of +47% of MSBs anticipating growth in their workforce over the next year.

17 Growth for everyone: CBI/Accenture employment trends survey Exhibit 10 Expected size of workforce in 12 months time All respondents 2014 (%) Smaller than today 12% Don t know 1% Larger than today 50% Exhibit 11 Positive balance of firms expecting workforce growth (%) Same as today 37% All respondents 2013 (%) Smaller than today 12% Don t know 0% Larger than today 51% Jobs growth will be balanced across sectors Almost every part of the private sector is expected to see jobs growth in the year ahead. In manufacturing, the positive balance of businesses expecting to add employees has climbed to a new high (from +35% in 2013 to +41% this year Exhibit 12). The construction industry is also expecting to create jobs at an increased pace, with even stronger jobs growth expected a positive balance of +54% now expect to have a larger workforce in 12 months time, up from +51% in 2013 (Exhibit 13, page 18). If businesses in these sectors are to be able to achieve job growth at this rate and fill the newly created roles, there is a pressing need to step up activity on skills development an issue we explore in section 5. Same as today 37% Exhibit 12 Expected workforce changes in manufacturing (%) building on the workforce growth of recent years The positive hiring intentions of respondents to the 2014 survey indicate that the jobs growth of recent years is likely to continue (Exhibit 11). The positive balance of firms expecting to add employees over those expecting to shed jobs jumped in 2013 to +39% from +20% in The latest results with a positive balance of +38% of businesses anticipating workforce expansion in the coming year suggest more openings will become available for people to move into work and progress in their careers. Smaller than today 7% Same as today 43% Don t know 2% Larger than today 48%

18 18 Growth for everyone: CBI/Accenture employment trends survey 2014 Exhibit 13 Expected workforce changes in construction (%) Exhibit 15 Positive balance of firms expecting workforce growth, by region/nation (%) Smaller than today 5% Don t know 0% Same as today 36% Larger than today 59% Scotland 50% Most parts of the services sector also expect to add jobs in the coming year. In professional services, for example, nearly two thirds of firms (64%) expect to have more employees in a year s time than today, with just 7% expecting to shed employees (Exhibit 14). This gives a positive balance of +57% of businesses anticipating extra hiring. and businesses in every part of the UK expect to add jobs A positive balance of businesses in all regions across England and in Scotland, Northern Ireland and Wales anticipate adding jobs over the coming year (Exhibit 15). The results suggest firms in every part of the country are growing in confidence that the economic recovery is becoming more securely based. Northern Ireland 36% Wales 45% North west 49% West Midlands 44% South west 37% North east 44% Yorks & Humber 42% East Midlands 43% East of England 41% South east 44% London 43% Exhibit 14 Expected workforce changes in professional services (%) Smaller than today 7% Same as today 29% Don t know 0% The north west is leading the way in England, with a balance of +49% expecting a larger workforce next year. Across the UK as a whole, employers anticipate particularly strong rates of workforce expansion. With six in ten (60%) looking to grow their workforce over the next year and just 10% anticipating reductions, the positive balance stands at +50%. Even at the other end of the scale, strong positive balances of businesses in Northern Ireland and the south west are anticipating growth in their workforces of +36% and +37% respectively. Larger than today 64%

19 Growth for everyone: CBI/Accenture employment trends survey Recruitment to permanent jobs will be stronger than for temporary posts Jobs growth through the early stages of the recovery was weighted towards temporary jobs. As the recovery becomes more soundly based, however, the balance has shifted. Building on last year s results, two fifths (40%) of respondents in 2014 now plan a higher recruitment of permanent employees across all or some parts of their organisation in the next year (Exhibit 16). In contrast, just 12% of businesses anticipate lower levels of recruitment across all or some parts of their organisation. This gives a positive balance of over a quarter (+28%) of firms planning to increase recruitment to permanent posts. The previous two surveys indicated a positive balance of organisations planning to increase permanent positions by +9% in the autumn of 2012 and +18% in the autumn of The rise this year to +28% suggests that business confidence is continuing to grow as the economic recovery beds in. Exhibit 16 Plans for permanent recruitment over the next 12 months (%) 11 Higher levels of recruitment across the whole organisation Higher levels of recruitment in specific parts of the organisation 15 Higher levels of recruitment in some parts but lower recruitment in other parts No overall change in recruitment levels Lower levels of recruitment in specific parts of the organisation 6 9 Lower levels across the whole organisation No recruitment Don t know * * intentions for next six months Just under a third (30%) of businesses are planning to increase levels of recruitment of temporary workers across all or parts of their organisation (Exhibit 17). The proportion of businesses anticipating reducing their temporary hiring over the next 12 months is 14%, producing a positive balance of +16% of businesses looking to expand their temporary hiring over the coming year. This is a significantly smaller proportion than the +28% balance planning to expand permanent recruitment in the next year. More graduate job opportunities are opening up This year s survey indicates further growth in job openings for graduates (Exhibit 18, page 20). More than a third (36%) of businesses plan to grow their graduate recruitment across all or parts of their organisation. Just 6% are planning a reduction, giving a positive balance of +30% for the year ahead, up from +20% in Exhibit 17 Plans for temporary recruitment over the next 12 months (%) 12 6 Higher levels of recruitment across the whole organisation Higher levels of recruitment in specific parts of the organisation 9 Higher levels of recruitment in some parts but lower recruitment in other parts No overall change in recruitment levels Lower levels of recruitment in specific parts of the organisation 12 Lower levels across the whole organisation 13 7 No recruitment Don t know * * intentions for next six months 32 42

20 20 Growth for everyone: CBI/Accenture employment trends survey 2014 As the economy moves towards more high-value and high-skill activities, the demand for higher level skills is set to increase. The improving job prospects for graduates reflects business demand for higher level skills and increasing confidence about the economy, as businesses feel more able to take on and develop young people. However, businesses are continuing to report major skill shortages in sectors such as manufacturing, engineering, construction and digital. In the CBI s most recent education and skills survey, Gateway to growth, close to half of businesses (42%) would like to see an increase in the number of science, technology, engineering and maths (STEM) graduates. 12 As we explore in section 5, there remains a significant mismatch between the supply of skilled graduates leaving higher education and the skills demanded by business. Exhibit 18 Plans for graduate recruitment over the next 12 months (%) We must keep up momentum on the apprenticeship agenda Apprenticeships have the potential to play a crucial role in providing valuable routes into work for young people while delivering the skills including the higher level skills that businesses need. In parts of the UK, ambitious reforms are underway designed to raise the quality and relevance of apprenticeships by putting employers in the driving seat. To date employers have responded positively with, for example, over 1,000 employers from across 37 different sectors currently involved in the trailblazer initiative to design top-quality apprenticeships in England. 13 This year s survey shows that nearly two in five firms (38%) are planning to expand their apprentice recruitment around the same level as last year (Exhibit 19). Exhibit 19 Plans for apprentice recruitment over the next 12 months (%) 11 Higher levels of recruitment across the whole organisation Higher levels of recruitment in specific parts of the organisation 5 6 Higher levels of recruitment in some parts but lower recruitment in other parts No overall change in recruitment levels Lower levels of recruitment in specific parts of the organisation Lower levels across the whole organisation No recruitment Don t know * * intentions for next six months Higher levels of recruitment across the whole organisation Higher levels of recruitment in specific parts of the organisation 7 3 Higher levels of recruitment in some parts but lower recruitment in other parts No overall change in recruitment levels 2 3 Lower levels of recruitment in specific parts of the organisation Lower levels across the whole organisation 9 No recruitment Don t know * * intentions for next six months 27 48

21 Growth for everyone: CBI/Accenture employment trends survey Just 5% of businesses are anticipating a reduction in apprenticeship hiring in the coming year, giving a positive balance of +33% planning to increase their number of apprenticeship openings in Looking at the results by sector, a positive balance of +52% of manufacturing firms and +64% of construction businesses expect to increase their apprenticeship starts in the year ahead. The picture on pay is slowly improving but we need progress on productivity In last year s survey we anticipated a return of pay rises to a level matching that of inflation. In the private sector, this has largely happened, with company pay settlements at 2.3% and latest data from the Annual Survey of Hours and Earnings (ASHE) suggesting employees who remained in work for a year saw a wage increase of 4.1%. 14 Average earnings growth for all employees has been lower, due to a number of factors like public sector pay restraint, job creation in lower-paying sectors which were hit relatively hard during the recession, and have since been recovering and an increase in employment for young people, who typically start off on lower wages. As businesses look ahead, the impact of labour costs on competitiveness is at the forefront of employers minds. With future changes to the calculation of holiday pay (see section 9) and the majority of businesses in the UK auto-enrolling their employees from 2015, 15 the cost of employment is set to increase. Prudence on the paybill costs has supported strong employment growth since the downturn and remains essential if the economic recovery is to be sustained. Real growth can only come with improvements in productivity. Businesses therefore continue to take a cautious line on pay (Exhibit 20). Nonetheless, over half of respondents (55%) to this year s survey plan a pay rise for employees in line with inflation (as measured by the RPI) or better. This reflects the fact that productivity is likely to improve next year, feeding through into pay, although there is a significant amount of ground still to be made up and productivity growth will remain weak by historical standards. The proportion of firms planning a pay freeze remains at very low levels (8%) by the standards of recent years. Exhibit 20 Firms approach to their next pay review (%) 4 General increase above RPI General increase in line with RPI 19 General increase below RPI 17 Targeted pay increase for some staff only Pay freeze 4 Other And measures must address the cause rather than the symptoms The rhetoric around the cost of living, the national minimum wage (NMW) and the living wage is likely to intensify as we move towards the 2015 general election. Given the squeeze on living standards we ve seen since the financial crisis, tackling the incidence of low pay is certainly important. But politicising the NMW or pushing for universal adoption of the living wage, regardless of other factors, fails to address the drivers behind low pay and the squeeze on real incomes. 37

22 22 Growth for everyone: CBI/Accenture employment trends survey 2014 Exhibit 21 Business views on who should set the national minimum wage (%) Exhibit 22 Business views on the living wage (%) Don t know 4% Sector-based rates agreed through collective bargaining 8% Other 1% Don t know 2% Other 2% A good idea that should be made mandatory 19% Pay has to reflect productivity 40% The government should set the basic rate 13% Assessed by an independent body the Low Pay Commission (LPC) based on economic data, alongside employer and employee views (the current mechanism) 74% Must be a voluntary decision to avoid job losses 37% Business is clear that the NMW and role of the independent Low Pay Commission (LPC) in recommending rates is a policy that works and it is one politicians should not interfere with. Three quarters (74%) of businesses think that an independent LPC should continue to take an evidencebased approach to recommending NMW rates (Exhibit 21). This has proven its worth over time, with a large body of evidence confirming that the introduction of, and upratings to, the NMW have had few or no negative effects on employment. Reflecting this, only one business in eight (13%) would like to see the government set the NMW. Even fewer (8%) think sector-specific NMWs should be set through collective bargaining. Businesses are clear that pay must reflect productivity and that the decision to pay wages above the NMW must be voluntary (Exhibit 22). Asked for their views on the Living Wage campaign, 37% of businesses think it is an important reminder of cost of living pressures but believe its adoption must remain a voluntary decision to avoid job losses. Two in five firms (40%) highlight that pay has to reflect productivity, so getting people into work and supporting skills development are the best ways to help employees progress to higher pay. Less than one fifth (19%) of businesses think the living wage should be mandatory this group of respondents is concentrated in higher-paying sectors and the public sector, indicating the impracticability of imposing such a rate across all businesses.