CIC Economic and Policy Briefing | The current state of the UK Economy
Posted by Nilam Modhwadia, Recruitment Consultant on Sunday, July 9, 2023
The rising cost of living and record-breaking inflation rates have all led to uncertainty regarding the current economic stability of the UK. As this issue is perhaps one of the most talked about current affairs in the UK, I attended an economic and policy briefing held by the UK Construction industry Council (CiC). In this article, I will discuss the current state of the UK Economy with a particular focus on how the current economic uncertainty in the UK has affected employment and recruitment.
UK Economy latest
The United Kingdom, like many countries, is grappling with the challenges of rising inflation rates and a mounting cost of living crisis. As such, the government is trying to find a solution to bring down inflation, placing a heavy focus on the interest rates.
The latest report by the Bank of England in June 2023 highlighted an increase in the interest rates to 5%, which was decided in the latest monthly MPC (Monetary Policy Committee) meeting. Seven out of the nine MPC members voted for an increase of 0.5%, whilst only two members preferred to have maintained the Bank Rate at 4.5%. Moreover, the interest rates have been raised at each of the last thirteen MPC meetings in the effort to bring down inflation to 2%, the current government target.
However, with the current inflation rate at 7.9%, this target seems quite far away and consequently a worry for millions of Britons. For example, with the interest rates and inflation both rising, mortgage-payers and renters are finding it increasingly difficult to keep up with their substantially rising monthly payments. Recent Census data has illustrated that around 47% of adults in Greater Britain had seen rises in their payments in the past 6 months. Correspondingly, 43% said that they were finding these payments very or somewhat difficult, up from a quarter (25%) in June 2022.
On top of these rising mortgage costs is perhaps the most worrying increase of them all – food price inflation, with the annual inflation rates for this category in March and April 2023, reaching the highest ever seen in over 45 years. The current rate stands at a staggering 18.4% increase, with the Census data highlighting that almost half the population reduced their food shop. Of those, 96% said rises in the price of food shopping was a reason why their cost of living had gone up.
Surprisingly though, one CiC member mentioned that surveys have indicated that UK confidence rate has improved for both businesses and households. For instance, globally, supply chain issues have continued to ease, meaning more than two-thirds (68%) of businesses with 10 or more employees were able to get the goods they needed from within the UK in May 2023 without any form of disruption. Consumer shopping and retail sales have also seen an increase, partially due to the recent warmer weather. These factors have all led to stronger than expected UK economic data since May, with the hopeful indication of “more persistence in inflation.”
Employment & Recruitment latest
In terms of the labour market, Labour productivity in the UK, was 0.6% lower in the year to Quarter 1 (Jan to Mar) 2023 when compared with the same quarter a year ago. This perhaps helps explain the stagnation in GDP growth since 2022 as well as the forecasted weak growth potential. Generally, vacancies have also fallen back, and fewer people are moving jobs due to fears regarding job security.
However, although the UK labour market remains tight, there are signs of some changes. Notably, the Construction industry made the biggest upwards industry contribution to annual productivity growth (output per hour worked) as of Quarter 1 2023. This has also been reflected by our ever-growing list of construction vacancies.
Despite the intervention of Covid-19, growing material costs, and supply chain concerns, a government and industry partnership named Construction 2025, has created a useful plan to grow the industry by at least 60,000 jobs. With hopes of achieving all its ambitions within the upcoming years, the expanding employment prospects, increased economic and construction production, and many initial goals have already been accomplished far before the 2025 date!
The UK construction industry has been steadily growing, with projects, construction output, and employment rates ever-increasing. Private sector pay growth in April has also increased to 7.6%, which has been evident by the compensation packages provided by many of our premium companies we are currently hiring for.
In summary, despite uncertain macro-economic conditions, with the ongoing confidence and skills shortage in the construction industry, it seems like there has never been a better time to research and consider your next construction job – and also it is a great time for employers to reach out to us to help connect them with the scarce recruitment talent that we are able to secure for our clients.
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Nilam is a Recruitment Consultant based in the Maxim head office in Leicester, UK. She supports the team with researching, headhunting, shortlisting, and interviewing valuable construction industry candidates, to place them in premium construction jobs with our market-leading UK and international clients.