Report shows employment up, but instability ahead

The BDO Employment Index jumped 1.57 points from 106.05 in June to 107.62 in July, rising against the long-term average of 100. This month’s reading is the highest level seen so far this year. 

Responsibility for the increase in jobs lies primarily with the hospitality industry, which has been hiring at a rapid rate following the widespread re-opening of pubs, bars and restaurants. 

HMRC’s payroll data for June revealed the largest month-on-month increase since the series began in 2014, with the easing of restrictions driving employment gains across the economy. 

The forthcoming withdrawal of the furlough scheme in September, however, is likely to bring change to the job market, BDO cautions. 

Strong inflation, too, could derail the recovery, as BDO’s Inflation Index remained at the second highest level recorded in four years with a reading of 103.70, a slight fall of 0.13 points from last month.

Rising wages, caused by the strong labour market, appear to be a driving factor of inflation. Employers report a difficulty in finding skilled workers, and are paying more to attract and retain talent.

And the pressure the pandemic placed on global supply chains has also impacted inflation, with firms facing problems importing goods and materials due to Brexit. 

Kaley Crossthwaite, a partner at BDO, welcomed the jobs market surge, but noted there were still challenges ahead for UK businesses.

“The surge in employment is a timely boost and shows how quickly the relaxation of restrictions has impacted the economy. It now appears that one of the biggest problems faced by employers will be filling roles as both the pandemic and Brexit give rise to staff shortages,” said Ms Crossthwaite.

“This could well lead to a long-term trend of rising wages, which is already a contributory factor in the record high inflation index figure. Combined with a material shortage caused by pandemic disruption, and ongoing disruption at the border because of Brexit, businesses are not yet out of the woods.”