UK companies should pay their workers more in an effort to retain staff and encourage more people into jobs, according to the boss of one of Britain’s biggest recruiters.
(Bloomberg) — UK companies should pay their workers more in an effort to retain staff and encourage more people into jobs, according to the boss of one of Britain’s biggest recruiters.
James Reed, chief executive officer of Reed Recruitment, called on firms to “make work pay” for their employees and increase salaries by as much as they could afford.
His words come in sharp contrast to advice from the Bank of England, which has urged restraint on wages. Its policymakers are worried that inflation driven by external shocks such as the war in Ukraine and higher commodity prices could become embedded in the economy if workers start demanding higher pay in the expectation that prices will rise further.
“Many companies are looking at what they need to do to retain people and paying people more money is an obvious one,” Reed said in an interview with Bloomberg TV. “Employers should take a generous view and should seek to pay people more wherever they possibly can in this environment.”
He acknowledged the remark “might be controversial in some quarters, but I think over time workers have had a worsening deal and that’s been to the detriment of business more widely and the economy too.”
Britain is suffering a labor market crunch, with businesses struggling to find the workers they need due to a combination of rising retirement rates, poor health, Brexit and an outflow of foreign workers during the pandemic.
Inflation is still worryingly high in the UK at 10.4%, more than five times the Bank of England’s target. Meanwhile Prime Minister Rishi Sunak is feeling the heat to ease the cost-of-living burden on households ahead of a general election which must be held before early 2025.
While some of the labor market pressures which emerged in the aftermath of Covid have begun to ease – Reed’s data shows vacancies were down 14% year-on-year in the first quarter following last year’s red-hot market – job postings remain above their pre-pandemic high.
“Every sector is struggling to hire at the moment and I can’t see that changing quickly,” Reed said.
Even so, he was optimistic on the UK outlook.
“Inflation will come down,” he said. “It’s going to come down more slowly than expected, but it will come down. And I think confidence will slowly return to the economy. It’s more robust than a lot of people credited it for.”
Reed urged the UK government to develop a focused “workforce strategy” to ease pressure on jobs and to fuel economic growth.
“There should be a workforce strategy,” said Reed. “That’s a limitation on growth, the shortage of skills. That could apply to revamping the apprenticeship system, adult skills system.”
He said that strategy should “encourage the development of clusters of expertise” such as in Cambridge, which has become a hub for biotechnology firms.
Recent analysis of Reed data by Bloomberg showed that Cambridge, along with Milton Keynes, Reading and Manchester, has among the highest rates of job creation per local worker in England.
While the government needed to take the initiative for developing a new strategy, Reed said, the onus lay on officials, businesses and individuals to improve the skill set of UK workers.
Technologies such as artificial intelligence are “exciting in many ways”, Reed said, but workers need to ensure they can still compete in an increasingly automated world.
He said the current apprenticeship levy is “too complicated”, and the government would be better off encouraging a system where firms could give their workers money to be spent on a relevant training program.
Read more:
- Jim O’Neill Says UK Treasury Needs ‘Imagination’ to Spur Growth
- BOE’s Tenreyro Sees Rates Falling to Keep Inflation On Track
- UK Labor Market Shows Signs of Easing With Weaker Pay Growth (3)
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