Published Thursday 29th August 2019
Many sectors of the UK economy have struggled since the Brexit vote of 2016. A weakening currency and wider uncertainty regarding future trading have left much of the national economy on a slow decline. Particular concerns in the manufacturing and construction sectors have left some economists to believe the UK remains on the brink of a recession.
However, it appears that the British people have pushed against the tide of economic downturn. Earlier this month, it was reported that annual wage growth was at its highest in over a decade. Meanwhile, employment figures remain hugely positive, despite the stalling economy. Are the latest labour numbers an indicator as to the makeup of post-Brexit Britain, or are they only masking deeper problems under the shell of UK plc.?
The Current UK Employment Picture
At the end of June, the Office for National Statistics (ONS) reported that regular wage growth increased by 3.9% in the year. The figure has been mostly on the rise since mid-2018 and was up from 3.6% last month. It is the highest number for this statistic in the previous 11 years.
Employment figures have been noticeably high for the last twelve months. In early August, the ONS reported an overall employment rate in the UK of 76.1%, the joint-highest since records began in the 1970s. Whilst the unemployment rate saw a slight increase over the recent period, it is still lower than a year earlier.
Wage Growth Points to Concerns for UK Businesses
Whilst many of these figures are positive for a new government, they could foreshadow deeper economic problems for already strained businesses. For much of the last year, high employment figures have been an indicator of the short-term approach of major companies as a result of Brexit. With the future economic outlook still uncertain, businesses have turned away from significant investments and instead put money into the labour market to bridge the gap. Overall, business investment dropped in every quarter of 2018, with the most notable impacts felt in the manufacturing sector. This lack of investment is often cited as one of the reasons why UK productivity is so low.
Employees have been able to benefit from a larger job market as a result of this strategy. However, labour can only go so far, with many experts believing these figures may have reached their peak. First of all, this 11-year high in wages is aided by an unusual increase in public sector pay in July last year. Meanwhile, the high employment rate has led to many firms being unable to fill vacancies, which has also supported this wage growth. Eventually, the gains from increased labour will be lost due to its expense, inevitably leading to an employment slowdown.
A Point of Strength for Brexit Britain
Regardless of expectations, short-term movements in employment and wages, much like the broader economy, pin on the Brexit outcome later this year. If a no-deal Brexit takes place, the economic contraction will likely be large enough to trigger a decline in wage growth and employment. However, many analysts believe the performance of jobs and wages over the last year shows its strength, and a sharp fluctuation would not be expected.
Wage growth represents a positive economic strength at a time when many indicators are pointing downwards. An increase in real wage growth (adjusted for inflation) of 1.9% for the year means more money in consumer’s pockets. As a result, economists expect higher consumer spending over the coming months, providing slight foundations to an economy that will become increasingly unpredictable as October nears.
Here at Expense Reduction Analysts, we’ve been helping major UK companies reduce their expenses as the Brexit deadline nears. Our procurement specialists work in a range of cost areas, including personnel services, creating a range of corporate cost savings. With the UK economic outlook continuing to change, it pays to analyse all expenses, ensuring your business is in as strong a position as possible going forward. If you are interested in reviewing your current procurement strategies ahead of the Brexit deadline, get in contact with our helpful team today!