UK labour market reaches strongest level since start of pandemic

  • BDO’s Employment Index returns to pre-pandemic levels amid widespread recruitment drives
  • Soaring employment boosts optimism, however inflationary pressures weaken the long-term forecast

The BDO Employment Index reached its highest level in March since the start of the pandemic, but growth could be short lived according to the latest Business Trends report from accountancy and business advisory firm BDO LLP.

The Index rose for a fifth consecutive month to 112.74, representing a month on month gain of 1.99 points. This was driven by widespread recruitment drives in recent months as businesses focused on expansion, with the unemployment rate dropping to below pre-pandemic levels at 3.9%. The Index now sits well above the 95 level which indicates growth.

A buoyant labour market has also driven the BDO Optimism Index to 107.49, its highest point since December and an increase of 1.68 points compared to the previous month.

Strong hiring intentions across both manufacturing and services sector businesses outweighed the ongoing concerns around the cost-of-living, rising energy prices and supply chain disruption caused by the Russian war in Ukraine.

However, this positivity could be short lived, with inflation predicted to soar throughout the year and external pressures expected to grow.

Commenting on the results, Peter Harrup, head of BDO LLP in East Anglia, said:  

“The labour market has shown resilience throughout the pandemic and then continued growth as restrictions have gradually lifted.  

“While it’s reassuring to see employment return to near pre-pandemic levels, this strong form could come to an end as the cost-of-living crisis, rising inflation and wider geopolitical matters distract businesses from growth and place pressure on the employment index.”   

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