More firms look to recruit, says BDO

BDO’s employment index has reached a 30-month peak, as hiring expectations catch up with improving business confidence.

That’s according to the accountancy firm’s latest Business Trends which measures hiring intentions over the next two quarters, and other indicators of business performance.

The employment index reached 99.4 in December, up from 98.3 in November and has now been at or above the 95 level that indicates employment growth for 12 months.

Business confidence showed similar improvement with the optimism index, which predicts business performance two quarters ahead, reaching 103.4 in December, up from 103.1.

This is the index’s highest reading in seven-and-a-half years, marginally below its highest score in Business Trends’ 22-year history.

In the services sector, which accounts for roughly three quarters of the economy, new orders and clients’ willingness to commit to contracts lifted optimism to 100.7 in December, up from 100.4. The manufacturing confidence sub-index reached 115.5, up from 115.3, close to an all-time high.

Tim Entwistle, partner and head of BDO in North West, 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 1.5 million 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 1st 2014.  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.”

The indices are calculated by taking a weighted average of the results of the UK’s main business surveys. Taken together the surveys cover over 4,000 different respondents from companies employing approximately five million employees.