Wages Rising with Unemployment

New data from the Office for National Statistics (ONS) has revealed that wage growth has remained strong despite a surge in the UK's unemployment rate. Between January and March 2024, the unemployment rate rose to 4.3%, marking an annual high point.

Unemployment, Vacancies and Wages

This uptick has been accompanied by a slowdown in job vacancies available, intensifying competition among job seekers. Contrary to expectations of a drop-off, pay rises held steady at 6%.

When factoring in inflation, which measures the rate of price increases, wages saw a 2.4% increase. Liz McKeown, director of economic statistics at the ONS, pointed out that this translates to real pay growth at its highest level over two years. Despite the positive note, McKeown highlighted ‘tentative signs’ indicating a ‘cooling’ of the British job market.

The decline in job vacancies has been notable, with a drop of 26,000 recorded between February and April 2024. Although the figure of 898,000 remains higher than pre-pandemic levels, increasing unemployment levels now mean more jobseekers for each vacancy.

In the first quarter of 2024, the ratio of unemployed individuals per vacancy rose to 1.6, up from 1.4 in Q4 of 2023. While this ratio remains relatively low, it suggests a shift in the labour market.

Impact on SMEs

The current state of the UK job market poses fresh challenges for small business leaders. As unemployment rises, SMEs may be inundated with inadequate job applications, leading to longer hiring processes. Competition for coveted individuals might drive up wage demands, placing additional strain on business owners, particularly those operating on tight budgets.

These challenges mean British businesses may face difficulties planning future growth and expansion. However, proactive measures can help mitigate their impact.

Advice for Business Owners

1. Focus

Retaining existing talent can be just as important as recruiting new employees. Offering competitive salaries, opportunities for career progression and a supportive work environment can strengthen employee loyalty and avoid a high turnover rate.

2. Streamline

Given the increased competition for jobs, recruitment efficiency is vital. Utilise technology to automate admin tasks, ensuring you have adequate infrastructure to support the tech your business uses, such as a fast internet connection. Conduct video call interviews with tools such as Zoom and Microsoft Teams to save time, and consider hiring remote workers to widen your pool of candidates.

3. Invest

Upskilling existing employees through personal development plans can boost productivity. Tailored training strengthens your team's capabilities and creates a culture of continuous learning.

4. Plan

Prudent financial management is essential during times of economic uncertainty. Review your budget, identify areas for cost-cutting and explore alternative funding sources if necessary. Diversifying revenue streams and maintaining a cash reserve are solid risk mitigation strategies.

5. Adapt

Flexibility is vital when navigating trying times. Be prepared to adjust your strategies in response to changing circumstances. Monitor industry trends, listen to customer feedback and be proactive in seizing opportunities for expansion.

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Sam White