THERE is no escaping the recession we are slipping into. The UK economy will shrink by 1.4 per cent in 2023 and unemployment will jump to 4.9 per cent.
Yet simultaneously, businesses are aggressively recruiting to fill vacancies and almost three quarters still plan to take on more staff.
It may seem paradoxical, but this won’t be a recession characterised by high unemployment. In fact, it will be the opposite.
Some 63 per cent of businesses say they are struggling to grow due to high staff turnover. We will remain in the grips of a hiring boom for this reason, alongside growth stimulated by pandemic recovery; a tendency among employees to change jobs more frequently; a reduction in available workers following Brexit; and a battle for real-terms wage increases to make a dent in the heightened cost of living.
What we will see next year will be an entirely different recruitment market to what’s typical of recession. No drop in demand is coming anytime soon, and businesses, public and third sector organisations must prepare accordingly.
That’s not to say some sectors won’t feel the pain of layoffs. The 2008 financial crash saw sharp declines in numbers employed in construction, some manufacturing sectors, the gambling industry, and hospitality. Recession hits different industries differently, so the impact will be sector specific.
Some individuals, particularly the over 50s, are returning to the workforce. In part down to the squeeze on household budgets, this will plug gaps and address short term skills shortages. But it does little to mitigate the long-term issue.
Employment levels are close to their peak in Northern Ireland, meaning there aren’t many more people to be enticed back. Employers are chasing the same talent pools, so the surplus of vacancies will remain high and number of candidates comparatively low.
Typically, a recession will reduce the number of vacancies due to less money in the economy. We will see a lag in job creation; however the current surplus means job opportunities will be plentiful, even when the economy enters the negative.
Despite high inflation, high interest rates and current economic volatility, employers will still need to up their game and deliver value if they want to attract in and retain their existing staff.
This is where HR policies that might previously have been considered perks have serious value. Flexibility to offer remote-capable jobs; attractive pay and benefits to cover the cost of living; help with travel and childcare; a healthy company culture and a focus on diversity and inclusion all feed into that all-important Employer Value Proposition.
We are in a time of impatience, as people seek to climb the ladder quickly. The enormous labour market churn will not therefore simply be cancelled out by recession.
It’s a scary prospect, but those who thrive in 2023 will be the ones who keep their eye on the long-term trends and implement change, particularly regarding their approach to training and upskilling.
The alternative, as seen in previous recessions, is hanging onto workers that no longer fit the business rather than letting them go because talent is scarce. It’s a concept known as labour hoarding and has plagued employers for several years.
Sourcing in different talent pools and reducing time-to-hire will become even more relevant throughout the next year to avoid this labour hoarding and stay competitive. A strong Employer Value Proposition will no longer be attractive, but a necessary offer to maintain staffing levels as the UK slips into recession.
Donal Laverty is consulting partner at Baker Tilly Mooney Moore
