October's Market Insights

Welcome to the October edition of the Meridian Insights.  It has certainly been an eventful start for Labour since the election.

As you’ve probably seen, last few weeks have been dominated by the publication of the new Employment Rights Bill which was promised by Labour within 100 days of taking office.

Labour Market Overview

The latest ONS Labour Market Overview shows that:

• UK unemployment rate decreased slightly to 4%, 1.386 million people unemployed
• Unemployment amongst young people is reducing but remains high, particularly the youngest age
• groups (aged 16-17 = 20.6% / aged 18-24 = 12.8%)
• Employment rate increased slightly to 75%, 33.37 million people in employment
• UK economic inactivity rate decreased slightly to 21.8%, similar to 12 months ago
• 9.263 million people are economically inactive, only a small increase of 14,000 on last year but 635,000 higher than pre-pandemic levels
• Vacancies fell again to 841,000, the 27th period fall, down 34,000 from previous quarter, but still above  pre-Covid levels.  This means there were 1.6 unemployed people per vacancy in June to August 2024, down from the previous quarter
• Payrolled employees for September 2024 were 30.3 million, a rise of 0.4% compared to last year. This is a rise of 113,000 over the last 12 months and 1.34 million higher than pre-pandemic levels
• Annual growth in regular pay without bonus increased by 4.9% (this was the lowest growth since 2022) and with bonus by 3.8%. Adjusted for inflation, annual growth regular pay was 1.9% and total pay was 0.9%
• Claimant count increased by 32,100 on the month and 253,200 on the year to 1.797 million. This is the measure of those receiving benefit principally due to being unemployed
• Redundancies decreased to 2.8 per thousand employees, slightly lower than the last quarter and 12 months ago
• 31,000 working days were lost because of labour disputes in July, down from 41,000 in the previous month

Labour Market Trends and Research

The British Chamber of Commerce Quarterly Recruitment Outlook found that fewer firms were recruiting. Key findings include:

• Only 56% of firms were attempting to recruit new workers – the lowest level in three years
• Significant sectoral differences with Transport (73%), hospitality (70%) and construction (67%) attempting to recruit
• Of those attempting to recruit, 76% faced difficulties up from 74%
• Construction (85%), manufacturing (80%) and hospitality (76%) firms are most likely to face recruitment problems

The London School of Economics (LSE) latest research on Why do flexible working arrangements exist? found workers on zero-hour contracts (ZHC) face lower wages and significantly higher turnover rates, yet such jobs have 25 per cent more applicants than a permanent position for the same role.

In addition, it found ZHC staff typically stay in their job for only a third as long as the same staff on fixed-hour contracts – with more than 10 per cent of those hired on ZHC leaving before they even work a single shift.

The Institute for Employment Studies (IES) Future of Employment Support reports a major contraction in the UK labour force, driven primarily by fewer people entering the workforce rather than more people leaving. The IES suggests that better support for people returning to work is crucial for addressing this. 

The Financial Times notes that private sector median pay awards have fallen to 4.4% in the three months to July, reflecting a softer labour market.

HR Review reports on a recent survey by HR software provider Ciphr revealing that 26% of UK employees are seeking new job opportunities this year, driven by cost-of-living challenges, with young people being the most motivated to change jobs.

The Resolution Foundation's Labour Market Outlook Q3 2024 report highlights the government’s plan to replace the Apprenticeship Levy with the more flexible Growth and Skills Levy, aimed at making training more accessible for businesses.

The Minister for Employment, Alison McGovern MP has vowed that the lockdown generation will get life changing support into work and has pledged to ‘turn the page’ on years of failure, saying there “has been too much focus on welfare and social security and not enough on helping people into work - leaving a generation of young people abandoned in a broken labour market”.

The Government has introduced a new industrial strategy, replacing the previous Conservative government’s focus on high-skill, high-wage jobs. Invest 2035: The UK’s Modern Industrial Strategy  highlights eight growth sectors: Advanced Manufacturing, Clean Energy Industries, Creative Industries, Defence, Digital and Technologies, Financial Services, Life Sciences, and Professional and Business Services. As part of creating a pro-business environment, people and skills are a key policy area.

Skills development is a central pillar of this strategy, with Skills England established to tackle skills shortages. Additionally, the forthcoming ‘Get Britain Working’ White Paper will outline plans to overhaul job centres, deliver a youth employment guarantee, and devolve work, health, and skills programmes to local areas.

UK Immigration Policy Update

The Government has tasked the Migration Advisory Committee (MAC) with reviewing the financial requirements of the family immigration rules. These include the Minimum Income Requirement (MIR) and adequate maintenance (AM) tests, which assess whether an individual joining or remaining with family members in the UK (for more than six months) is financially independent and won’t require public funds. The MIR is currently set at £29,000, with plans from the previous government to raise it to £34,500 by early 2025, and £38,700 later that year

The Government has also released the latest figures on visa applications:

• There were 37,900 applications for Skilled Worker visas between April and September 2024, representing a 6% increase compared to the same period in 2023. However, Health and Care Worker visa applications decreased to 2,100 in September 2024, continuing a decline since August.
• In the first half of 2024, 15,259 young people arrived in the UK under the Youth Mobility Scheme. Australia and New Zealand were the largest contributors, with 9,900 and 5,300 workers respectively. Despite this, YMS participants remain a small fraction of the 685,000 net migrants recorded in 2023.

According to the Financial Times, immigration is driving the fastest population growth in the UK in half a century, with the population reaching 68.3 million by mid-2023, a 1% increase over 12 months. England and Wales experienced faster growth (1%) than Scotland (0.8%) and Northern Ireland (0.5%).

Seasonal Workers’ Scheme

The previous government extended the Seasonal Worker visa route to 2029. For 2025, a total of 43,000 visas will be available for horticulture (2,000 fewer than in 2024), and 2,000 for poultry. The current government has yet to announce changes to this scheme and is still expected to respond to the MAC’s Seasonal Worker Visa Review.

A Focus on Labour Exploitation (FLEX) report on the UK labour migration system highlights recruitment barriers such as sponsorship costs and difficulties attracting domestic workers. It also notes changes in employment practices (wages, shift patterns, and labour providers) and concerns over the long-term viability of industries like agriculture.