Businesses keen to hire but productivity questions remain

The hiring intentions of UK businesses are at ‘sky-high’ levels with figures stronger than the heady days of the mid 2000s boom, research finds.


The hiring intentions of UK businesses are at ‘sky-high’ levels with figures stronger than the heady days of the mid 2000s boom, research finds.

The BDO’s Employment Index stands at 113.0 – well above last year’s figures 104.3, suggesting that UK firms will continue to boost job creation in the coming months.

However the report still raises areas of concern for the economy, with the UK continuing to fail to increase productivity, despite continuing strong economic expansion. 

British workers’ output per hour has been static during the last two years of the recovery. Such a long period of flat productivity is unprecedented in the period since World War II and the trend is unique amongst advanced economies, says BDO. 

Despite this negative trend, the firm’s Output and Optimism Indices, which predict economic growth three and six months ahead respectively, remain significantly above the 100 mark, which indicates growth above the long-term trend. 

The Output Index rose to 103.9 in March while the Optimism Index held firm at 104.9, revealing UK business confidence to be at levels not seen since summer 2014.  Firms have been given an additional boost as input costs continue to fall, with BDO’s Inflation Index sitting at just 93.8 (down from 94.7 last month), indicating deflation.

The indices are calculated by taking a weighted average of the results of the UK’s main business surveys. They incorporate the results of the quarterly CBI Industrial Trends Survey (and the CBI Monthly Trends Enquiry which is carried out in the intervening months); the Bank of England Agents’ summary of business conditions; and the Markit/CIPS Manufacturing and Services PMI data.

Commenting on the findings, BDO partner Peter Hemington says, ‘While it is encouraging to see strong business confidence, the UK’s continuing poor labour productivity performance is a very significant concern.  

‘Although employment growth in recent years has been strong, much of this has been in part-time jobs.  Productivity ultimately determines our prosperity so it is a crucial area that must be addressed.  Policymakers of all persuasion must take on this productivity puzzle.’

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