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UK Edition
12th February 2024
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THE HOT STORY
Employment rate falls to its lowest in a decade
Employment levels in the UK's private sector have dropped to their lowest in a decade, reaching 98.77 on BDO's employment index. The decline is attributed to uncertainty surrounding the economy, high interest rates, and weak consumer demand. Starting salary growth has also slowed, and permanent hiring has been in contraction territory since October 2022. Meanwhile, a report by the Chartered Institute of Personnel and Development (CIPD) reveals that employers believe that pay in private firms will rise by 4% in 2024, while pay increase expectations in the public sector have fallen from 5% to 3%. It was also shown that 60% of employers surveyed by the CIPD reported hard-to-fill vacancies, while one in five expect significant problems filling vacancies in the next six months.
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HIRING
Businesses frustrated with difficulty of attracting British workers
Businesses have expressed frustration at the difficulty of attracting local workers, leading them to turn to overseas staff. According to Max Mosley, an economist at the National Institute of Economic and Social Research, international workers are propping up the labour market as employers struggle to compete for British staff. Over nine million people of working age have left the jobs market, resulting in a doubling of companies registering to become sponsors for hiring overseas staff. The Home Office is facing unprecedented demand for work visas before the rise in the minimum salary threshold in April. The minimum salary required for a foreign migrant to qualify for a skilled worker visa will increase from £26,200 to £38,700. The Home Office is reviewing its visa services to prevent a collapse before the changes.
Investment banks cut vacancies by up to 75%
Investment banks in the UK have significantly reduced their job vacancies, according to analysis from recruiter Morgan McKinley and website Vacancysoft, with openings at Citigroup, Barclays, JPMorgan, Morgan Stanley, and HSBC falling by an average of 50%. Citibank experienced the largest drop, with a 75% decrease in vacancies. The decline in hiring comes amid a dip in corporate deals which has impacted the banks' revenues. The cutbacks in hiring come alongside a number of job losses, with Citi and Barclays having announced cuts already in 2024 and Goldman Sachs and Morgan Stanley announcing job losses last year.
Big Four cut vacancies as advisory demand eases
Analysis from labour market analytics website Vacancysoft shows that the Big Four have not only announced job cuts in recent months but also scaled back their UK vacancies. The report shows that while firms ramped up hiring during a post-pandemic boom in demand for advisory services, they are now starting to cut back. PwC reduced its vacancies to 786 in 2023, with this down nearly 60% on the 1,949 recorded the year before. EY’s vacancies fell by 55%, from 1,699 in 2022 to 766 last year. Deloitte posted 721 vacancies, with this just under half of 2022’s total, while KPMG reduced vacancies from 2,111 to 1,800, a decline of 15%.
Law vacancies in the City slump
Hiring activity in the legal market has fallen back in line with pre-pandemic figures while demand for in-house roles has slumped. According to data from Search and VacancySoft, 2023 saw quarterly and monthly vacancies come in consistently lower than the previous year. The steepest fall came in Q2, when vacancies dropped 34% from the same quarter in 2022. For in-house legal roles, there was a 29.4% year-on-year decline in vacancies.
WORKFORCE
Asda faces strike threats over cost-cutting
Asda's owners, Mohsin and Zuber Issa, are facing the threat of strike action as they cut hours in an attempt to reduce costs, with estimates revealing that 8m hours have been lost across Asda's workforce in the past two years. The GMB union says the cuts have raised concern over health and safety. A spokesman for the union confirmed that it is in dispute with Asda across several stores, "with a reduction in hours being one of the key issues". However, union leaders said "positive discussions" have started "in an attempt to resolve some of the issues our members are experiencing." Attempts to reduce Asda's wage bill come as the business looks to deal with interest payments caused a debt pile worth £4.2bn. 
John Lewis workers could strike over job loss fears
The John Lewis Partnership (JLP) is facing the threat of workers going on strike over possible job losses. Staff have called for reassurance that jobs at the partnership, which owns John Lewis department stores and Waitrose, will be safe. This follows reports that the business plans to cut up to 11,000 jobs from its 76,000 strong workforce. In a letter to JLP chair Sharon White, GMB union national officer Nadine Houghton wrote: “If workers do not get the answers they feel they deserve, they will not hesitate to request GMB begins a ballot of workers.” The letter says workers are “deeply concerned” that a recent reduction in redundancy pay amounted to “the first step in a large round of job cuts.” 
REMUNERATION
Soames pushes for US-style executive pay packages
Confederation of British Industry (CBI) president Rupert Soames is pushing for US-style pay packages, having sought to amend pay policy at Smith & Nephew to reflect higher salaries for executives in the US. Mr Soames, who took over as Smith & Nephew chair four months ago, has pitched a “hybrid” US-UK pay scheme for chief executive Deepak Nath and his team to reflect Wall Street pay practices. While companies often used time-restricted stock as a form of payment, they have been controversial in the UK as they have no performance conditions attached. However, it has been suggested that UK firms may need to shift their stance in a bid to compete for talent with US firms. The Telegraph’s Michael Bow says Mr Soames' idea has reportedly won broad support from shareholders, “underlining the recognition that companies with a large US presence may have to pay US-style packages to compete overseas.” Mr Mow suggests that if shareholders back Mr Soames’ plan, it could “open the floodgates” for more US-style pay packages for other UK listed firms. He notes that remuneration policies at UK firms have seen a “sea change” in recent months as investors look to help make London more competitive.
Fujitsu bosses paid £26m during Horizon contract
Fujitsu UK, the firm behind the flawed computer system Horizon, has paid its leading executives more than £26m in the 25 years since its contract with the Post Office started. Analysis of accounts also shows that the firm paid more than £11m to former directors for loss of office during that time. While Fujitsu's accounts do not list the salaries of its UK bosses, its European subsidiaries and holding company report the pay packets including base salary, bonuses and long-term incentives of their highest-paid director. While the reports do not name individuals, in most cases the chief executive is the highest-paid director.
REGULATION
Advisers flag regulation fears as a cause of stress
Fears of tighter regulation keeps a third of advice firm owners awake at night, according to the Lang Cat's State of the Advice Nation report. The poll of 400 members of the advice profession found that advisers are concerned about the pace and volume of regulation. Steve Nelson, director and co-author of the report, said: “The burden of regulation continues to be a massive headache for firms and it’s a real concern to see this driving some to breaking point.  Many respondents from smaller firms talked about the disproportionate impact on them.” It was also found that one in ten advisers are concerned about failing to meet client expectations, while 9% flagged fears over managing workloads. For 8%, the rising cost of doing business linked to regulatory fees and increase in tech budgets is a source of stress. While 14% of advice business owners are considering selling their business to a consolidator in the future, this rises to a third for advisers aged 65 and over.
CORPORATE GOVERNANCE
Winslow to take over at Direct Line
Adam Winslow, formerly the head of Aviva UK, will become chief executive of Direct Line at the start of March. Previous CEO Penny James stepped down in January 2023 after the FTSE 250 company saw an unexpected dividend cut and a fall in its share price.
TAX
Hunt under pressure to give manufacturing firms tax breaks
A group of business leaders has urged Jeremy Hunt to help manufacturers in the wake of a global supply chain crisis, calling on the Chancellor to introduce preferential tax treatment for the sector. The Independent Business Network (IBN) says the Treasury should set up special industrial zones where companies are encouraged to invest through lower regulatory requirements, faster planning and reduced business rates. It also called for a 15% rate of corporation tax rate for manufacturers, a higher threshold for when they start to pay VAT, tax relief for employers that create new manufacturing jobs, and lower business rates for companies which invest in larger factories. IBN chief executive Brendan Chilton commented: “In an increasingly dangerous and uncertain world we need to ensure the security of our own supply chains.”
ECONOMY
Economy hit by recession and rising inflation
Official figures due this week are set to show that the UK economy saw a recession at the end of last year and a rise in inflation at the beginning of 2024. Office for National Statistics (ONS) data is expected to show that inflation rose to 4.2% in January, up from 4% in December. Separate ONS data is predicted to show that GDP shrank by 0.1% in the fourth quarter of 2023, with this following a 0.1% contraction in GDP in Q3. This would equate to a technical recession, which is defined as two consecutive quarters of negative growth. Despite this, Paul Dales of Capital Economics remains optimistic, saying: “The good news is that any recession will be tiny and may already be nearing an end.” He added: “We think the economy will recover over the coming quarters.”
 


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