The Business Concept Q3 2023

Interest rates rise making businesses more cautious about hiring, BDO report says The UK labour market is beginning to slow down as rising interest rates take their toll on hiring activity, according to new data out today from BDO. According to the latest data from the accountancy firm, demand for workers slowed for the second consecutive month in August bringing BDO’s employment index down by 0.81 points to 110.92. The previous monthly dip in hiring intentions in July was the first fall in six months, suggesting that higher rates are finally starting to cool the labour market. “Businesses are reacting to the higher interest rate environment with conservative decisions about hiring,” Kaley Crossthwaite, partner at BDO, said. The survey comes ahead of official labour market figures for July, set to be published by the Office for National Statistics on Tuesday, as the Bank of England considers whether to hike interest rates again. Data has suggested that in June, annual pay growth excluding bonuses hit 7.8 per cent, the highest level since records began in 2001. There was also a rise in the unemployment rate, which climbed to 4.2 per cent from 3.9 per cent. July’s pay growth figures are expected to show average earnings increased at around 7.6 per cent, slower than last month but still worryingly fast. The unemployment rate meanwhile is tipped to rise to 4.3 per cent. Data out last week from KPMG and the REC revealed reduced recruitment activity, with the fastest fall in permanent placements in over three years. However, the survey showed that pay pressures remained elevated, with starting salaries continuing to rise in August. Derek Mackenzie, CEO, Investigo said: “With businesses grappling to stay ahead of the curve around AI and cyber trends, having a dedicated talent pipeline in place should be a top priority for ambitious organisations who are seeking growth. A cooling of the labour market should not mean turning a blind eye to the urgent need to build a highly skilled workforce, and organisations who fail to properly prepare for the future will face challenges as the economy accelerates.” Nov22262