Confidence is key to employment market, but wage growth is crucial to recovery

IN business, confidence is important, and when it comes to recruitment, it is everything. A belief in better times to come, laying the groundwork for growth and success, is essential when companies consider whether to take on the cost and responsibility of bringing new staff on board.

That’s why it’s encouraging to see the latest figures from the Business Confidence Index (BCI), which show a net increase in this key measure in the UK during the period to October. Survey results on the impact of Covid-19 show that 78.4 per cent of businesses now have moderate to high hopes of surviving the next three months, which should be enough to fuel the jobs engine of our economy.

On top of that, new unemployment data released yesterday paints a less discouraging picture in Scotland than might have been anticipated.

Although redundancies in the UK rose to a record high of 370,000 in the three months to October, unemployment in Scotland actually fell slightly to 4.2%. While this remains a deterioration on the situation prior to the pandemic’s outbreak, it does quell the possibility of double-digit unemployment in Scotland.

There were 44,000 job vacancies advertised online across Scotland in November, down 29% on the same period a year earlier, but up 4% on October. Given that November marks the start of the usual

seasonal decline, bucking this trend is a further hopeful sign.

Having said all of that, companies do of course remain cautious, with many choosing to beef up their resources with temporary staff to meet the demands of the festive season. Temporary positions made up 10% of the roles advertised in November, compared to 7% in the same period a year earlier, with significant increases in demand for temporary staff in the legal, retail and customer services sectors.

Confirmation of the launch of a Covid vaccination programme at the beginning of December should further boost confidence, but there will be more challenges along the way. The collapse of Debenhams and the Arcadia Group of retail outlets will lead to about 25,000 more job losses across the UK, and it will be difficult for those affected to find like-for-like replacement roles. Alternative retailers in food or sports will be their best opportunity, with supermarkets like Lidl expanding to create new jobs in Scotland.

A further concern is wage growth, as consumer spending is crucial to driving us out of recessionary fears. Average pay growth in Scotland is lower than in any other UK region apart from the north-east of England, with employers under financial pressure seeking to keep costs down as much as possible.

Broadly speaking, there have been two groups of job seekers throughout this pandemic: those who have been made redundant and are desperately seeking any income; and those who have some sense of security, but are still looking elsewhere for all the usual reasons. Employers recruiting from the latter group should particularly beware taking too much advantage of the squeeze on wages, as staff who feel underrated on the value hierarchy are more likely to head elsewhere the moment a better offer arises.