Businesses are scaling back on hiring plans as Brexit uncertainty scuppers the preciously resilient jobs market, BDO says.
Employment figures from the Office for National Statistics (ONS) show that the number of people in work between October and December 2018 hit a record high.
However, BDO’s ‘Employment Index’ – which tracks firms’ hiring intentions for the next 6 months – fell from 115.11 in January to 113.99 in February, marking the second consecutive month of decline.
This chimes with a recent series of high-profile announcements by UK employers – including Nissan and Jaguar Land Rover – which are relocating production out of the UK signalling wider issues in the market.
Business confidence has continued to trend downwards, with BDO’s Optimism Index falling by 0.19 points in February to 99.79. This marks the seventh consecutive monthly fall and is the lowest the index has been since December 2016.
Manufacturing businesses were hardest hit by the decline, with BDO’s Manufacturing Optimism Index dipping from 104.40 to 103.84.
Meanwhile, BDO’s Services Optimism Index fell by 0.14 points to 99.28.
Despite the general economic malaise, output in the services sector saw an increase in February, propping up UK output overall.
However, BDO’s Output Index remains well below the long-run average, standing at 98.32 in February.
The manufacturing sector performed particularly badly, falling by 1.01 points to 97.36 in February, mirroring the weak performance observed across advanced economies.
“The bright spot of Britain’s low investment, low growth economy in recent years has been its flexible labour market,” said BDO partner Peter Hemington.
“This has been Europe’s jobs creation machine, sucking in workers from all over the Continent. Unfortunately the uncertainty created by Brexit is bringing this trend to a halt, with hiring intentions sharply down over the last two months.
“Once the Brexit chaos is resolved, we need to decide as a country what sort of economy we want to have.
“But, in almost any scenario, we need to see higher levels of investment by companies to ensure that a smaller number of employees are more effective as they go about their work. This will require thought, leadership and decisive action from the government.”