Only a fifth of UK businesses plan to cut jobs this year even though the vast majority expect a recession, a survey from Boston Consulting Group found.
(Bloomberg) — Only a fifth of UK businesses plan to cut jobs this year even though the vast majority expect a recession, a survey from Boston Consulting Group found.
Three quarters of the 1,500 UK business leaders polled by BCG’s Centre for Growth believe the economy will shrink in 2023 but only 20% plan to shed staff, fewer than the 29% who plan to increase headcount.
Overall, 77% expect of senior leaders expect their workforce to stay the same or grow over the next 12 months.
The findings in BCG’s State of UK Business 2023 report are likely to make difficult reading for the Bank of England. Not only do they contradict its forecast for rising unemployment, which it hopes will slow record earnings growth, but they reveal inflation may prove uncomfortably sticky.
The study said 56% of leaders across all sectors and businesses of all sizes say they will continue to increase prices over the next six months, which “hints at the persistence of inflation.”
Companies remain upbeat about their own and the UK economy’s outlook over the next two years.
Also, 77% of leaders are positive about their own business prospects over the coming year, and 61% say growth will “be somewhat or significantly better in 2025, challenging the view that the UK is slipping into a medium-term malaise,” the report said.
Companies still face challenges. Four in five leaders list higher energy costs as one of their three largest threats over the next 12 months. Other major threats are higher taxes, falling consumer demand, higher interest rates, supply-chain disruptions, and staff or skill shortages.
Plea for Help
The government can help by cutting value-added tax, lowering energy taxes, reducing the levy on corporate profits to 15% from the 25% it is due to rise to in April, and reforming business rates — a local authority charge on commercial properties.
A separate survey of 377 UK services companies by the Confederation of British Industry employers group found that consumer-facing firms are cutting back investment in buildings and machinery due to slowing demand, rising costs and weak confidence. Spending on information technology is expected to grow.
Charlotte Dendy, CBI Head of Economic Surveys, urged Chancellor of the Exchequer Jeremy Hunt to take “serious action” to boost investment in his Budget on March 15.
“There’s no doubt the services sector continues to face tough times, not least those dependent on consumer spending power during a period of high inflation and rising interest rates.”
“To offset the six-point rise of corporation tax in April and restore investor confidence, firms want the government to replace the super-deduction by either introducing full expensing for capital investments or setting out a three-year roadmap to achieve that.,” she said.
The super-deduction, which allows firms to reduce their tax bill by 25 pence for every 1 pound they spend on qualifying plant and machinery, is due to come to an end on March 31. It was introduced in 2021 in an effort to kick start the economy in the wake of the pandemic.
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