Jobs growth on the way as West firms start to benefit from recovery

January 13, 2014

Further proof that businesses are benefiting from the strengthening economy emerged today with figures showing jobs growth on the way and high levels of confidence.

The number of firms expecting to take on more staff is now at a 30-month high, according to the latest employment index staged by accountants BDO.

The index, which measures businesses’ hiring intentions over the next two quarters, reached 99.4 in December – up from 98.3 in November.

The index has now been at or above the crucial 95.0 level that indicates employment growth for 12 months and is now almost at the 100 mark which points to employment increasing at its long-term rate.

Business confidence also improved in December with BDO’s optimism index, which predicts business performance two quarters ahead, reaching 103.4 – up from 103.1 in November. This is the index’s highest reading in seven and a half years, marginally below its highest score in Business Trends’ 22-year history, and comfortably above the 100 mark that indicates trend growth – approximately 2.4% – of the economy.

Both services and manufacturing sectors are now expected to achieve strong growth during the first half of 2014.

In services, which account for roughly three quarters of the UK economy, new orders and clients’ willingness to commit to contracts lifted optimism to 100.7 in December, up from 100.4 in November.

The manufacturing confidence sub-index reached 115.5, up from 115.3, close to its all-time high, suggesting that manufacturing will see robust growth through the second quarter of 2014.

BDO’s output index, which reflects current order books and therefore predicts short-run growth expectations, increased to 102.5 in December, up from 101.8 in the previous month. The manufacturing sub-index rose from 108.1 in November to 109.8 this month, its highest since April 2011, while the sub-index for the services sector rose for the seventh consecutive month to reach 100.8, up from 100.4.

BDO’s inflation index declined for the seventh consecutive month to 98.7 from 99.7 in November, indicating that inflationary pressures on businesses continue to ease.

Total wages continued to grow by less than the annual rate of consumer price inflation, meaning real wages are falling, while the cost of Brent Crude oil fell 0.1% in sterling terms over the year to December, which helped manufacturers control costs.

BDO South West partner and head of regional office in Bristol, Graham Randall, pictured, said: “We’re encouraged to see that businesses are growing in confidence and have sharply increased their hiring intentions over the past month, which should help to keep the unemployment rate on a downward trajectory.

“The issue of unemployment is particularly important given the Bank of England Governor Mark Carney’s decision not to allow an interest rate rise until the unemployment rate is at or below 7%. 

“The flip side of all this is that labour productivity is still far below its pre-crisis peak. As a result, the issue of underemployment remains, with some 1.5m workers seeking full-time jobs being forced to work part-time over August-October 2013.

“Linked to the debate around employment is the politically sensitive issue of immigration. The Government will undoubtedly be waiting with baited breath to see the effect of the relaxation of border controls that came into force on January 1. However, our data suggests that the UK has the capability to create more jobs both for UK citizens and for others than some might expect.”



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