Private Sector experience of recession could help Public Sector
navigate spending cuts

London, UK (May 24, 2010)

Employers believe that good communication and engagement with staff has been the key to making the workforce changes needed to safeguard jobs during the recession, according to a new report by the CBI and recruitment experts Harvey Nash.

Picking up the Pace: the CBI/Harvey Nash employment trends survey 2010 provides an insight into how employers and staff worked together during the depths of the recession to keep job losses to a minimum. Now the private sector is emerging from recession, its experience of engaging employees to change working patterns and cut costs could help the public sector navigate imminent spending cuts.

The survey of UK employers, which together employ almost 3 million people, reveals that nine out of ten employers (91%) communicated the impact of the recession on their business to staff. As a result, 87% of businesses believe staff understood the need to change working patterns, and more than half (56%) said staff showed a flexible attitude to change.

As the economy recovers, the survey also shows that employers have been able to phase out some of the more drastic measures introduced during the recession and are hiring again. A year ago nearly two-thirds of companies had a recruitment freeze in place. This fell to 37% six months ago and now stands at just 5%.

But economic conditions remain challenging. Consequently, most businesses are still adopting a cautious approach to pay. 16% are still operating a pay freeze, while just 3% are planning to make an above-inflation pay award.

John Cridland, CBI Deputy Director-General, said:

"Employers have come out the other side of the recession, having managed to keep many more people in jobs than had been expected. This has been largely down to the flexibility and goodwill of staff who quickly adapted to emergency measures, including pay and recruitment freezes. Good communication played a key role in helping employees understand the changes needed to safeguard jobs.

"Although there are some signs that job prospects are improving, a good number of businesses are still operating a pay freeze. Those that can afford it are planning modest or targeted pay rises. By contrast, earnings growth in the public sector is outstripping the private sector.

"So far the public sector has been cushioned from the impact of the recession, but it now faces a squeeze. Drawing on the experience of the private sector in engaging employees during the recession to deliver much-needed change could help the public sector minimize the pain of spending cuts."

Reflecting on how they got through the recession, a large majority of employers (83%) believe the UK's flexible labour market helped stem job losses. Nine out of ten companies made changes to working patterns in response to the recession. The most widespread measures were pay and recruitment freezes, which were introduced by 58% and 54% of firms respectively. More than a third (35%) embraced flexible working, including tele-working.

Other changes to working patterns included: cutting back on paid overtime (32%); reducing the use of agency workers (28%); cutting shifts (13%) and short-time working (12%).

When asked to list their top three workforce priorities for the coming months, more than two-thirds of employers (67%) said achieving high levels of employee engagement is top of their list, followed by containing labour costs (48%). Recruiting to key vacancies (42%) and retaining staff (42%) emerged as the joint third most popular priorities.

Employers believe strong employee engagement was important during the recession and 7 out of 10 firms believe it will play an important role in the recovery. The most popular method of communicating the impact of the recession to employees was through face-to-face meetings (89%), backed up by email updates (54%), intranet postings (48%) and letters (26%).

In anticipation of a slow and fragile recovery controlling labour costs will continue to be an important priority for employers. This is reflected in the latest pay round with very few firms planning to make an above-inflation award. 29% of employers said they were planning a rise in line with RPI inflation, one in five (20%) a general increase below RPI, and a quarter (25%) said they intended to target rises on selected staff. The number of companies reporting they were planning to freeze pay at their next pay review dropped from 47% six months ago to 16%.

Employers face a difficult balancing act in their desire to retain existing staff and attract new recruits, while at the same time keeping a lid on costs. Recruitment prospects for the year ahead are mixed but improving. Just 5% of companies expect recruitment to be higher across their business as a whole. Instead recruitment is likely to be patchy and targeted on filling key posts. 23% expect recruitment to be higher in some parts of the business, while 27% expect it to be higher in some and lower in others.

Albert Ellis, CEO of Harvey Nash, said:

We are seeing the first indications in the market that businesses are gearing up for a return to growth and this trend is most concentrated in the technology, financial services sectors and some areas of manufacturing. Although the recovery is fragile, there is a sense that the UK economy as a whole has turned a corner.

"Our experience across many countries, particularly in Northern Europe, suggests that the UK is one of the first to reflect this upturn. The UK has one of Europe's most flexible labour markets and without doubt this will play a major part in the recovery. For the public sector the outlook is much less certain and we await the details of the Government's spending reduction plan.

"Whatever the outcome this year, our experience stretching back over twenty years shows that demand for talent will continue. This is reflected in the fact that the majority of employers express concerns about finding the appropriate skills to capitalise on the recovery."

Encouragingly, there are the first signs of an uptick in graduate recruitment. The number of firms planning to freeze graduate recruitment this year has dropped from 38% a year ago, to 6% during this survey period. And more than a quarter of employers (28%) expect to take on more graduates this year, against 14% expecting a drop. That gives a balance of +14% and compares with -31% in the November survey. Work experience, internships and placements are also being offered by more than two-thirds of businesses (68%).

With the economy fragile, employers are warning the Government not to introduce measures that make it harder for firms to create and sustain jobs. Instead the new Government should focus on minimizing red tape, and on measures to help the unemployed back into work and to build up the UK's skills base.

Notes to Editors:

1. The CBI/Harvey Nash employment trends survey 2010 survey was conducted between February and March. There were 666 respondents, employing a total of more than 3 million people. Respondents were based across the UK and represented a wide range of sectors, including the public sector.
2. The CBI is the UK's leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce. With offices across the UK as well as representation in Brussels, Washington, Beijing and Delhi the CBI communicates the British business voice around the world.
3. Harvey Nash, a global professional recruitment consultancy and IT outsourcing service provider, is committed to delivering the very best talent and IT solutions to a broad base of international clients. The Group is a trusted advisor to some of the world's leading business, governments and institutions. Operating from 38 offices covering the USA, Europe and Asia, its talented professionals pursue the highest levels of integrity and quality in providing a unique portfolio of services: executive search, interim management, IT and finance recruitment and IT outsourcing. Web: www.harveynash.com

Media Contact:

CBI Press Office on 020 7395 8239 or out of hours pager on 07623 977854

Harvey Nash press contact:

Rob Grimsey
Director, Harvey Nash
Direct: +44(0) 20 7333 1543
Email: robert.grimsey@harveynash.com