Hiring intentions across UK firms hit “sky-high” levels despite flat productivity

13th April 2015


Hiring intentions across British companies are at “sky-high” levels but worries remain over the strength of productivity a new analysis from accountants and business advisers BDO LLP has found.

In the group’s latest Business Trends Report, its employment index measured 113.0 – well above its long-term trend suggesting that UK firms will continue to boost job creation in the coming months.

The report has echoed the overall better economic backdrop where the latest data from the Office for National Statistics show that UK unemployment dropped by 102,000 to 1.86m in the three months to January, with the unemployment rate hitting 5.7%.

But there are still big areas of concern for the economy such as the UK is continuing its puzzling failure to increase productivity, despite ongoing strong economic expansion.

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

Despite this negative trend, BDO’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, which showed 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.

Commenting on the findings, Peter Hemington, partner at BDO LLP, said: “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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