Companies planning to hire staff at fastest rate in 16 years
12th August 2014

British companies plan to hire new staff at the fastest rate in 16 years, according to new research from accountancy group BDO.

The BDO Employment Index, which measures businesses’ hiring plans for the coming quarter, hit 109.6 in July, its highest level since 1998, and up from 108.8 in June, with companies in the services sector delivering a significant boost.

However, Peter Hemington, a partner at BDO, said that companies are feeling the effects of a tightening labour market with skills shortages beginning to bite.

“This could bring the stellar growth we’re enjoying in the wider economy to a grinding halt if the trend becomes entrenched,” he said, adding that some construction companies are having to turn down work because they cannot find enough staff to do it.

He added: “To address [skills shortages], the Government must ensure its protectionist tendencies are put on hold until productivity returns to pre-crisis levels.

“Although a new wave of graduates will go some way towards meeting businesses’ needs, readily available and flexible labour from Europe could relieve pressure on businesses in the short term.”

The research also revealed that employment prospects for university leavers are at their strongest since the financial crisis hit.

Mr Hemington added: “The good news is that the unprecedented growth we’ve seen in UK employment this year looks set to continue, providing this year’s university graduates with a welcome dose of good news in terms of job and salary prospects.”

Other findings from the BDO Business Trends report show that optimism is at its highest level for more than a year, although the rate of acceleration in business confidence is easing.

The BDO Inflation Index remained was broadly flat at 97.6 in July, far below the long-term average of 100 and only just above the 95 mark which indicates that costs are rising.

Labour-intensive services firms in particular continue to benefit from weak cost pressures, as spare capacity in the economy undermines wage growth.