In our Summer 22 Labour Trends Report we reported that, for the first time since records began, vacancies across the UK outstripped the number of people seeking work, creating an incredibly tight labour market. Since then, the British economy has officially entered a recession, public sector workers in several industries are on strike, rising levels of people are exiting the workforce and hiring is slowing. As we reach the close of this turbulent year, we consider the impact these conditions have had on the labour market and make our predictions on the 2023 talent trends which will affect UK organisations.

2022 in review

2022 recruitment trend summary:

• Global staffing market revenue is predicted to have grown by 11% in 2022, down from a staggering 23% in 2021. More modest global growth is expected in 2023, with 5% in the UK (SIA)
• UK staffing firms to exceed pre-pandemic revenue for the first time with 22% growth in 2022. Profit margins are set to decrease as staffing becomes costlier due to aspects such as rate rises. (SIA)
• Hiring activity waned at the start of the fourth quarter, the number of permanent placements fell for the first time in 20 months. Heightened economic uncertainty had led some clients to reassess their recruitment plans, while candidate shortages also dampened hiring. (REC Report on Jobs)
• A new £4.2bn contract has been awarded to BAE Systems, to build the second batch of Type 26 frigates creating 2,300 new jobs.
• Tight labour market conditions, fewer foreign workers and greater hesitancy due to economic uncertainty all dampened candidate numbers. However, the latest fall was the weakest recorded for just over 18 months amid softer declines in both permanent and temporary staff supply.

Employment rate up, but still below pre-Covid levels

The UK employment rate for August to October 2022 increased by 0.2 percentage points to 75.6% but is still below pre-coronavirus (COVID-19) pandemic levels.

Over the latest three-month period, the number of employees increased, while self-employed workers decreased. Estimates of payrolled employees for November 2022 show another monthly increase, up 107,000 on the revised October 2022 figures, to a record 29.9 million.

At least some of these increases will be due to seasonal work and temporary contracts over the festive period. So we may see a dip in these numbers in the new year.

Source: ONS Employment in the UK: December 2022

Vacancies falling, but still at an historic high

From September to November 2022, the estimated number of vacancies fell by 65,000 on the quarter to 1,187,000. Despite five consecutive quarterly falls, the number of vacancies remains at historically high levels. The fall in the number of vacancies reflects uncertainty across industries, as respondents continue to cite economic pressures as a factor in holding back on recruitment.

Unemployment up slightly

The number of people unemployed for up to six months has increased across all age groups. However, the unemployment rate is still at very low levels and has decreased overall this year.

Source: ONS Employment in the UK: December 2022

Economic inactivity down, but still above pre-pandemic rates

The economic inactivity rate decreased by 0.2 percentage points to 21.5% in August to October 2022. The decrease in economic inactivity during the latest three-month period was driven by those aged 50 to 64 years. This suggests that some people who had taken early retirement during or shortly after Covid have returned to the workforce, most likely as a result of the cost-of-living crisis.

Flexible working is the priority for the over-50s. The majority (77%) of over-50s who would consider returning to work cited flexible working (36%) as the most important aspect of choosing a new job. The majority of those who would consider returning to work or currently looking for work would like to return on a part-time basis (69%)

Source: ONS Employment in the UK: December 2022

Pay is up but not in line with inflation

Growth in average total pay (including bonuses) and regular pay (excluding bonuses) among employees stayed the same, at 6.1% from August to October 2022. For regular pay, this is the strongest growth rate seen outside of the pandemic period.

In real terms (adjusted for inflation) over the year, total and regular pay both fell by 2.7%. This is slightly smaller than the record fall in real regular pay we saw in April to June 2022 (3.0%) but still remains among the largest falls in growth since comparable records began in 2001.

Over the last 12 months, we have continued to see higher levels of bonus payments compared with previous bonus levels, particularly in March 2022 when the non-seasonally adjusted bonus payment was extremely strong. The largest bonus payments are in the finance and business services sector.

Private sector outstrips public in terms of pay

Average regular pay growth for the private sector was 6.9% in August to October 2022, and 2.7% for the public sector. Outside of the height of the pandemic period, this is the largest growth rate seen for the private sector and is among the largest differences between the private sector and public sector growth rates we have seen.

There were 417,000 working days lost because of labour disputes in October 2022, which is the highest since November 2011.

Gross domestic product (GDP) is estimated to have fallen by 0.6% in September 2022, driven by a fall in the services sector. Reasons include; price of energy and fuel, industrial action, currency exchange, additional bank holiday. (ONS – Office for National Statistics)

Predictions for 2023

Flexible working is here to stay

LinkedIn data shows more than a third of workers say they would quit if they had to return to the office full-time. Research by Future Forum found 65% of UK knowledge workers want significant flexibility in their work schedule.

New government plans mean that employees will be able to request flexible working from day one of their employment.

Flexible working doesn’t just mean a combination of working from home and in the office. It can mean employees job-sharing, using flexitime, and working compressed, annualised, or staggered hours.

These new measures will give employees greater control over where, when, and how they work, leading to happier, more productive staff. Flexible working helps employees to balance their work and home life, especially supporting those who have commitments or responsibilities such as caring for children or vulnerable people.

Minister for Small Business Kevin Hollinrake had this to say:

“Giving staff more say over their working pattern makes for happier employees and more productive businesses. Put simply, it’s a no-brainer.

Greater flexibility over where, when, and how people work is an integral part of our plan to make the UK the best place in the world to work.”

Whereas James Dyson was not as keen on the idea

“Flexible working does not suit all businesses and only time will tell what its effects will be on efficiency, cohesion within the workforce, company ethos and, ultimately, the success of businesses.”

Faith-based inclusion to become a priority

The importance of faith-based inclusion has long been recognised, but there’s still a long road to travel for employers to reach this destination. Research in the UK suggests Muslims face some of the highest levels of job discrimination.

Employees are looking for employers to ‘get’ the importance faith plays in both their personal and professional lives. In the UK, 91% of HR managers thought their organisation promoted an understanding of diversity and inclusion on religion and belief, but only 25% of workers agreed this was the case. 

Religious diversity has many benefits to creating an engaged, productive and inspired workforce. If employees feel confident to undertake the practices that are important to their faith without fear of discrimination, employers will get the best from them in return.

Let’s talk about Menopause

The “menopause conversation“, was long considered taboo and shameful. However, as the global population of menopausal and postmenopausal women is projected to grow by 47 million women a year it is something that employers are going to have to get comfortable talking about.

• 90% of women get menopausal symptoms
• 10% of women leave their jobs due to menopause
• Only 14% of women are on HRT in the UK

Effective support for menopausal women could be the key to keeping these valuable and skilled workers in the talent pool. The Bank of Ireland announced in October that it would offer paid leave for women experiencing menopause. We’re expecting to see other large employers follow suit.

More diverse routes into the workforce

University fees are incredibly expensive and that’s before you get to the living costs like accommodation, travel and textbooks.  On top of that, graduates are facing an unemployment rate of 12%. That equates to about 96,000 unemployed graduates every academic year). That’s compared to September 2022’s UK overall unemployment rate of 3.6%.

As a result, many young people are looking “learn while they earn”. Avenues such as apprenticeships, part-time study while they work or employer training are expected to become increasingly popular. Many employers will reap the benefit of offering training to staff, when it comes to attracting and retaining new talent. At Morson, we are funding a new STEM centre and multiple scholarships at the University of Salford.

Work-based socialising is evolving

Instigating social interaction in a hybrid work environment is a challenge many businesses are still struggling with. Some companies have begun to schedule in short meetings with no agenda. Others are leaving time at the end of meetings for open conversations. Some are creating virtual team rooms where colleagues can chat throughout the day. There is no one size fits all approach, but creating opportunities for colleagues to bond will have a huge impact on job satisfaction levels.

“Firms that stay ahead in hybrid will be intentional about how they use the virtual office – and be sure to schedule time for informal interactions – not just for the water cooler chat but also for learning.”

– Ashley Whillans, assistant professor at Harvard Business School

Embracing the metaverse

A recent YouGov poll found that only 37% of Brits are confident in describing what the metaverse is. However, VR and AR are already being used by pilots and surgeons in training. During the pandemic, automakers began to embrace this tech to design new vehicles. Whether we fully understand it or not, we’re expecting employers, universities and training programmes to jump into the metaverse in the coming year.   

Uncertainty may come with opportunity

It’s been a turbulent 12 months and while things may look uncertain for 2023, there are opportunities to be had. The great resignation has become the great reflection as candidates are considering what really matters to them. Many are looking for employers that share their values. Employees that feel a shared sense of purpose with the company they work for are less likely to job-hop. Working on your employer value proposition could help you attract and retain talent.

We have seen a slight decrease in the rate of economic inactivity. This may lead to new pools of talent emerging, as skilled workers come out of retirement and embrace new opportunities for flexible working.

Whatever the future may hold Morson is here to support you to attract, retain and develop the best talent. As a Morson client we listen, identify opportunities and curate solutions that are designed for you. Our solutions are for organisations seeking to enhance their capability, who need flexible, adaptable solutions to help scale, brand-led strategies to inspire, screening solutions to comply, ED&I insight to transform, training to develop or technology to streamline and accelerate. We offer a depth and agility that is unique to the Morson Group.