Brexit fears are weighing on jobs growth

A 'wait-and-see' approach is prevailing as UK firms wait for the outcome of the EU referendum.

by Rebecca Smith
Last Updated: 26 May 2016

The June referendum is causing many British firms to put business plans on hold, including hiring new employees.

While permanent appointments continued to rise in March, they have been doing so at the slowest rate for the past six months, according to research by Markit and the Recruitment and Employment Confederation. Meanwhile, hiring for temporary positions rose at the fastest rate in four months, according to the survey of 400 UK recruitment consultancies.

It’s another indicator companies are holding fire on any big commitments for the foreseeable future. Of course if a Brexit were to arise, this uncertainty may persist for longer. It’s not actually determined what kind of post-membership relationship with the EU the UK would actually want (and then if the bloc would be amenable to the proposal).

What will happen to foreign direct investment? If Goldman Sachs earlier prediction that sterling could fall 15-20% if Britain votes to leave the EU, will it put off foreign investors? Will UK-based companies actually up sticks and head elsewhere? Will it cost jobs? Nobody quite knows.

REC’s director of policy Tom Hadley says, ‘While we expect jobs growth to continue overall, we are now seeing the effects of current uncertainty in the marketplace for UK employment.’

As well as the looming EU referendum, he pointed to global economic headwinds as reasons for the slowing growth of permanent hiring as employers ‘take a wait-and-see approach’. That isn’t to say firms are putting the brakes on entirely when it comes to business moves – but there’s clearly more caution and concern about risks, as reflected in a recent study of FTSE 350 CFOs

While it seems many companies haven't actually put in place contingency plans in case of a Brexit, they are feeling edgy about the referendum's outcome and that's extended to an approach to hiring that involves less longer-term commitment. And you can expect that to continue up until June 23.

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