What challenges will the industry face in 2024?

What challenges will the industry face in 2024

Introduction

The UK economy is facing challenges, especially in dealing with inflation. The job market is adjusting, with job openings decreasing and more people returning to work after the pandemic. Despite these changes, the job market is still tight compared to historical standards, and it is expected to slowly improve in the future unless there are unexpected issues.

This situation means that hiring conditions will remain somewhat difficult, especially in lower-paid sectors like hospitality, food, retail, and distribution, where there are ongoing staff shortages due to the pandemic and Brexit. Job seekers are likely to have some influence on pay and working conditions during this changing period.

Economic Outlook

In 2024, the UK economy is facing major challenges, prompting policymakers to raise interest rates to control inflation. There are concerns about a possible recession, and growth forecasts are limited. The Bank of England predicts no economic growth, while the Office for Budgetary Responsibility is slightly more optimistic at 0.7%. Both organizations anticipate a modest increase in unemployment from 4.2% to around 5% by 2025.

Employers have become less eager to hire in recent months, although the job market remains stronger than before the pandemic. The Indeed Job Postings Index has decreased by 28% since its peak in December 2022 but remains 9% higher than the baseline in February 2020. Office for National Statistics data in October shows a 26% decrease in job vacancies from their peak. However, difficulties in official employment measures make it hard to accurately assess recent total employment growth.

Occupations tied to consumer spending, such as production, retail, distribution, and consumer services, have seen significant year-on-year declines in job postings. Construction is also affected by a housing market slowdown due to increasing interest rates. While intentions to hire more workers have lessened employers are hesitant to let go of existing staff.

Despite economic uncertainties, job seekers are optimistic about finding new positions. Around 43% of survey respondents actively seeking a new job in September expressed confidence in securing one in the next month, bouncing back from a previous dip earlier in the year.

Hiring Conditions

In the face of challenges in obtaining accurate data, determining the true tightness of the job market becomes complex. The unemployment rate, which stood at 4.2% in the third quarter, has seen an increase from 3.5% just over a year ago. The shift to an estimated 1.4 unemployed persons per job vacancy signifies a tightening job market, compared to the 0.9 ratio under a year ago. These indicators highlight the evolving dynamics and constraints within the labour market.

While immigration has played a role in increasing the labour supply, with 745,000 new arrivals in 2022 and sustained high net migration at 672,000 in the year to June 2023, there are still challenges to overcome. The Chancellor's Autumn Statement aims to invigorate workforce participation, particularly among the long-term jobless, through measures like cuts to National Insurance rates. Despite these efforts, the overall workforce is anticipated to face constraints, heightened by record NHS waiting lists and a significant number of individuals remaining inactive due to long-term sickness. Therefore highlighting the complex factors shaping the size and dynamics of today's workforce.

Wage Growth

Wage growth is vital for the Bank of England when deciding on future interest rate hikes. Although the Bank expects wage growth in the private sector to slow down in 2024 due to a more relaxed job market, it still predicts a substantial 5% increase by the end of that year. According to the Indeed Wage Tracker, posted wage growth dipped to 7.0% year-on-year in October, down from 7.4% in June.

Workers with the lowest pay will experience an increase in their wages following a record 9.8% raise in the statutory minimum wage to £11.44 per hour, effective from April 2024. The prevalence of job postings mentioning salary information remains high, suggesting that employers may need to advertise competitive pay to attract talent in a job market that is still relatively tight.

Flexibility

The job market, once led by candidates in the post-pandemic era, is now shifting power towards employers as demand for labour becomes less intense. The practice of remote and hybrid work continues, though there's a slight decrease in job postings mentioning these terms. Job seekers still highly value flexibility, as seen in their continued interest in remote and hybrid work.

Providing flexibility in location remains a tool for attracting and keeping talented individuals, especially for smaller companies competing against larger counterparts. Employers hiring for on-site roles are exploring alternative forms of flexibility, such as varied hours, shift patterns, and the emerging trend of four-day work weeks.

Conclusion

As the UK heads into 2024, it encounters economic challenges, but the job market stays strong. Although there's a possibility of a recession and potential issues may require additional actions from the Bank of England, the labour market's strength stands out