The quarterly survey of more than 2,000 employers by the Chartered Institute of Personnel and Development (CIPD) found a higher proportion of businesses surveyed said that they planned to increase staff levels compared with three months ago.
The net employment balance, which shows the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels, rose from a positive 20 in the last report to 22. Confidence was highest in business services, construction, healthcare and information technology.
Figures from the Office for National Statistics last month showed the number of people in work reached 32.71 million, the highest since 1971. Unemployment fell to 1.34 million, putting the rate at 3.9 per cent, the lowest level since 1975.
Demand for staff is creating recruitment and retention challenges. Two in five employers in the survey said it had become harder to retain staff in the past 12 months, particularly in the public sector. More than half of employers said they had increased starting salaries for at least a minority of vacancies and one in four have increased salaries for the majority of vacancies in response to recruitment pressures.
However, despite the labour squeeze, overall pay rise expectations for the 12 months to March 2020 in the private sector have fallen back from 2.5 per cent to 2 per cent. In the public sector they have risen from 1 per cent to 1.5 per cent.
Gerwyn Davies, senior labour market adviser for the CIPD, said: “The majority of UK workers are long overdue a meaningful pay rise. However, many workers will remain disappointed with their pay packets until there are significant and sustained improvements to productivity.”
The relatively optimistic picture painted by the CIPD research contrasts with the Bank of England’s forecasts last week which showed that the UK is heading for the longest run of falling investment since the Second World War. It has already declined for four quarters in a row.
A separate survey by BDO, the accountancy firm, found business confidence in April remained at its lowest level since 2012. The accountancy firm’s optimism index, which measures companies’ expectations for growth over the next six months, fell to 95.74 points last month, down from 96.1 points in March and from 99.79 points in February.
Activity in the manufacturing sector, which has been boosted by stockpiling activity, is expected to diminish. BDO’s manufacturing index, which tracks output growth in the sector, declined to 97.27 points in April, down by 8.32 points compared with the previous year. Optimism in the UK’s services sector fell for a ninth consecutive month to 95.06 points.
Peter Hemington, partner at BDO, said: “The only certainty businesses have at the moment is that the UK government still doesn’t know exactly how or when the UK will leave the EU. We are seeing the impact of this confusion, with business confidence plummeting.”
Ben Broadbent, Bank of England deputy governor, said Brexit uncertainty was putting firms off making investment decisions. He said that the Bank was forecasting business investment in three years’ time to be far short of the level the UK was at and “miles behind” forecasts before the EU referendum.