Responding to official labour market statistics, showing that the unemployment rate remained at its lowest since 1975, at 4.3%, while annual wage growth was 2.4%, Tej Parikh, Senior Economist at the Institute of Directors, said:
“While the UK’s record employment rate should be celebrated, it mustn’t mask the need to tackle points of weakness in the labour market such as the skills gap and low wage growth.
“The data for September to November showed that the unemployment rate remained at its four-decade low of 4.3%, while there were 102,000 more in work compared with the previous three months.
“The hiring and retention model adopted by businesses since the financial crisis will now be tested. Indeed there are a number of signs that these record levels of employment can only last so long. With immigration falling, and limited investment in talent and training amidst hesitance as a result of political uncertainty, our members are concerned about the pipeline of workers with relevant skills.
“By normal standards, strained supply in the labour market should push up wages, but basic pay grew only slightly to 2.4% (excluding bonuses). This is because businesses – particularly SMEs which employ 60 percent of the workforce – are facing high costs, uncertainty, and have limited productive capacities to raise wages. That, alongside still elevated price levels, means workers are likely to continue experiencing weak real wage growth for much of this year.
“This only emphasises the importance of creating more clarity around securing a transition deal in the short-term, and clarifying the Government’s ambitions for a future trade deal with the EU, so bosses can get back to investing in their workforce.”