- The proportion of firms who have increased their workforce falls to a fifth (20%) from 24% in Q4 2024, while 17% report a decline in their workforce
- 73% of firms say labour costs are creating pressure to put up prices
- Of those attempting to recruit, 76% of firms faced difficulties, down from 79% in the last quarter
- Construction (83%) and transport and logistics (82%) firms are most likely to be facing recruitment problems
- 20% of firms have reduced training investment over the last three months, while 22% have increased investment
The British Chambers of Commerce (BCC) Insight Unit’s latest Quarterly Recruitment Outlook (QRO) reveals only a fifth (20%) of firms increased their workforce over the last three months.
This is down from 24% in Q4 2024, as business grapple with rising costs, including the national insurance hike. Meanwhile, 63% said their workforce had remained constant and 17% reported a cut in staff.
The research for Q1 was conducted before the recent Spring Statement, with fieldwork carried out between 10 February and 10 March. Over 5,000 businesses from across the UK responded, 91% of whom are SMEs.
There was a fall in the number of firms attempting to recruit, 54% compared with 59% in Q4 2024. For the firms who have attempted to recruit in the last three months, 76% of respondents said they had experienced difficulties, down from 79% in the previous quarter.
Construction and engineering firms continue to struggle the most finding staff, with 83% reporting recruitment issues. Businesses in the transport and logistics sector are not far behind with 82% having difficulties. At the other end of the scale, 63% of marketing and communications firms faced hiring problems.
Labour costs continue to be the main pressure businesses are facing to raise prices – cited by 73% of firms (compared with 75% in Q4 2024). The pressure is felt most keenly in manufacturing (82%), transport and logistics (81%), hospitality (81%) and construction (80%).
The number of businesses reducing investment in staff remains similar to last quarter, with 20% of responding firms reporting a cut in training spend compared with 19% in Q4. Meanwhile, 22% said they had increased training investment and 58% of businesses said training investment had remained the same.
Ross McNally, Chief Executive and Executive Chairman of Hampshire Chamber of Commerce says:
“The challenges for businesses due to the rising costs in employment are being felt across all investment decisions. Margins, surpluses, innovation and new market initiatives are all constrained. These are core to productivity, trading and economic growth. The immediate priority must be to accelerate the introduction of Government policies encouraging enterprises to invest in future growth. This partnership is the way forward.”
What business say:
“We are still planning for a massive hit on our modest profitability when the new financial year starts. The changes to NI contributions, the reduction in rate support, the hike in minimum wage is the biggest factor for caution in terms of investment or hiring new staff.” Small hospitality firm in Cumbria
“Due to the NI changes, we are reducing employee numbers, have cancelled a planned pay rise and stopped future recruitment.” Medium professional service firm in Shropshire
“Over the past 6 months we have reduced staff levels and will not increase staff for the next 3-years due to the changes to company tax and labour costs. As a result, we will now be moving all future expansion and employment to the USA.” Small manufacturing firm in Essex
Jane Gratton, Deputy Director Public Policy, at the British Chambers of Commerce said:
“Firms are struggling under the weight of skills shortages, recruitment difficulties and spiralling employment costs. There are signs of businesses pausing recruitment plans, scaling back training investment and, in some cases, reducing the size of the workforce. The likely impact on job opportunities and business growth is worrying.
“Firms are now facing higher bills from the rise in both employer national insurance contributions and the national minimum wage. The full impact won’t be seen until later this year.
“The recruitment crisis in the construction sector is particularly concerning. It was really encouraging to see the boost in construction skills investment announced at the Spring Statement, but it is unlikely to be the quick fix firms need.
“Continuing to loom large is the proposed employment rights legislation, which threatens to add huge extra costs and complexity for businesses. We need ministers to listen to business concerns and ensure the legislation strikes the right balance.
“The government must act now to minimise costs for businesses and tackle the ongoing skills crisis – giving firms the tools they need to invest, recruit and grow.”
About the BCC Insights Unit
The BCC Insights Unit brings together all the strands of research the BCC undertakes, including the Quarterly Economic Survey, the largest private sector business survey in the UK. Our research is used extensively across the UK Government, Bank of England, and global institutions such as the IMF. The unit was recently awarded “Best UK GDP Forecaster” by FocusEconomics. It was launched in July 2023.
About the British Chambers of Commerce - Where Business Belongs
The British Chambers of Commerce (BCC) sits at the heart of a powerful network of 51 Chambers of Commerce across the UK, representing thousands of firms. It provides a unified voice for these companies, rooted in their communities, at the national level. We link our UK network with over 75 international member chambers, to promote trade and investment, and work for a better future for businesses around the world.
For more information, visit: www.britishchambers.org.uk
About Hampshire Chamber of Commerce
Hampshire Chamber of Commerce is the independent voice of local business across the county and one of the largest regional business networks in the UK. With a strategic vision to ‘unlock Hampshire’s potential’, Hampshire Chamber brings together the combined influence, strength and expertise of the county’s three former major chambers. It works with over 2,000 individual firms spanning all sectors and sizes of business. Member services include training, advice, international trade documentation, events, networking opportunities and lobbying to policymakers on issues affecting business. Hampshire Chamber’s business network is designed to help any employer to grow and thrive irrespective of their stage on the enterprise journey.