Labour Market Update – September 2024

16/10/24

Labour Market Overview

The latest ONS Labour Market Overview shows that:

UK unemployment rate decreased slightly to 4.1%, 1.437 million people unemployed
Unemployment amongst young people remains high, particularly the youngest age group (aged 16-17 = 21.7% / aged 18-24 = 13.3%)
Employment rate increased slightly to 74.8%, 33.23 million people employed
UK economic inactivity rate decreased slightly to 22.9%, still higher than 12 months ago
9.298 million people are economically inactive, an increase of 160,000 on last year and 747,000 higher than pre-pandemic levels
Vacancies fell again to 857,000, the 26th period fall, down 42,000 from previous quarter, but still above pre-Covid levels. This means there were 1.6 unemployed people per vacancy in May to July 2024, down from the previous quarter
Payrolled employees for August 2024 were 30.3 million, a rise of 0.4% compared to last year. This is a rise of 122,000 over the last 12 months. 1.31 million higher than pre-pandemic levels
Annual growth in regular pay without bonus increased by 5.1% (this was the lowest growth since 2022) and with bonus by 4.0%. Adjusted for inflation, annual growth regular pay was 2.2% and total pay was 1.1%
Claimant count increased by 23,170 on the month and 255,800 on the year to 1.792 million. This is the measure of those receiving benefit principally due to being unemployed
Redundancies increased to 2.9 per thousand employees, slightly lower than last year

The Youth Employment Outlook 2024 found that 1 in 8 young people in the UK are out of work, education or training. In addition, young people perceive that finding a job has become more difficult, but many remain optimistic about the future. 16 to 25 years olds face significant barriers to entering the world of work and the most common is a lack of training, skills and work experience. A third of young people report having a mental health condition and 85% believe this affects their ability to find work.

The HR Director reports ONS data revealing the Office for National Statistics (ONS) data reveals that the number of part-time self-employed workers aged 65 and over increased by 28.7% in the second quarter of 2022, rising from 264,761 to 340,779. Their average hours worked mainly fell within 16 to 30 hours per week. This increase underscores the growing importance of self-employment as a means of sustaining income in later life. It also reflects broader demographic and economic trends, as more people live longer and work beyond the traditional retirement age.

Many UK graduates are struggling to find their first job after university leading to many having to work for minimum wage. According to a report in the Guardian, 61% of those who graduated in 2022 have gained full-time work 15 months later – but many of them will find non-graduate work only. According to the Office for National Statistics, last year just 60.4% of graduates living in England aged 21-30 were in “high-skilled” work, while 26.4% of this group were in medium or low-skilled employment and 5.5% were unemployed.

The latest LHH Outplacement and Career Mobility 2024 Report found that 21% of UK businesses have undertaken layoffs and 30% are considering them with 42% of workers being concerned that they may be laid off. The UK has one of the lowest levels of redeployment programmes with only 26% of businesses having one in place.

The British Chamber of Commerce (BCC) have published their latest quarterly economic update. It has upgraded growth expectations for 2024 following an improved picture so far this year. The forecast for 2025 remains unchanged, with a minor upward revision for 2026. The average unemployment rate is expected to be 4.3% in 2024, rising slightly next year to 4.4%, before easing to 4.1% in 2025. That is a slight decrease from last quarter’s forecast. However, youth unemployment will remain high, with the percentage out of work forecast to be 13.3% this year, 13.4% in 2025 and 13.1% in 2026.

The Centre for Economics and Business Research (Cebr) published its Economic Outlook for Q3 2024. Key findings:

The UK grew by 0.6% in Q1 2024
Economy is expected to continue to grow this year and into next year
The reason for high wage growth is a tight labour market despite a recent uptick in unemployment. Skills shortages remain acute, with vacancies still above their pre-pandemic level.

The Work Foundation’s report Working Together: Maximising the opportunities of a multigenerational workforce found that three quarters (73 per cent) of senior business leaders have multiple generations in their workplace, yet there is a ‘say-do gap’ on how employers support managers to create inclusive workplaces. The report also revealed that while many organisations see the value of a multigenerational workforce, two in five (39 per cent) business leaders reported it leading to difficulties in communication and collaboration. For the first time in history, the report highlighted that there are four generations working together, from ‘baby boomers’ to Gen Z.

A new report from the Social Market Foundation, sponsored by Tesco, reveals that more than six million people in the UK—referred to as the “lost workforce”—are eager to work but face significant barriers to employment. This group, which makes up 14% of the working-age population, includes individuals who are unemployed or economically inactive due to caregiving responsibilities, health issues, or a lack of flexible job opportunities. The report estimates that fully integrating this group into the workforce could boost the UK economy by £454 billion.

The research highlights that the lost workforce struggles with a lack of skills and experience, with 75% not holding a degree. Other key barriers include health challenges, poor transport links, and a lack of confidence in the job application process—particularly among women and older workers. The report found that the lost workforce is disproportionately made up of those from low-income households, and the majority of this group is aged between 45 and 54. To address these challenges, the report recommends expanding access to work placements, improving careers guidance, retraining older workers, and introducing a national job and training guarantee programme. The findings suggest that overcoming these barriers could significantly raise employment rates and boost economic output, aligning with the government’s goals of driving growth and improving living standards.

Employment Trends

The KPMG and REC, UK Report on Jobs: North of England reports that the labour market downturn deepens amid falls in both permanent placements and temp billings. The number of staff placed into permanent roles fell markedly across the North of England in September. The latest drop in permanent staff appointments was the fifteenth in successive months, as well as the quickest across the third quarter. Recruiters are blaming the downturn on slower vacancy growth for permanent roles. The downturn was widespread at the national level, with all four monitored regions signalling a drop in permanent staff appointments. The decline in the North of England was largely in line with the UK average. For the first time in five months, recruiters in the North of England signalled a fall in temp billings during September. The decrease in billings for short-term staff reflected the non-replacement of leavers. There was also a drop in temp vacancies across the North of England, ending a five month run of growth.

The seasonally adjusted Permanent Staff Availability Index remained firmly above the neutral 50.0 mark in September, to signal a rise in permanent staff supply in the North of England. The rate of expansion was broadly consistent with the other months of the third quarter. Some recruitment consultancies linked the increase to a rise in redundancies. September survey data also revealed a sustained rise in availability of short-term staff across the North of England, extending the current sequence of growth to just over a year-and-a-half. The increase in temp staff supply was substantial and slightly faster than in August.

According to the recruiters who were surveyed, there was a general uplift in starting salaries across the region. However, salary growth slowed notably on the month to the least pronounced in three-and-a-half years and was only marginal overall. Short-term staff in the North of England saw hourly pay rates rise for a tenth successive month in September. The rate of temp pay inflation picked up slightly from that seen in August and was moderate overall. The North of England was the only monitored English region to register an uplift in temp pay in September.

The Employment Rights Bill

The government has introduced the draft Employment Rights Bill along with the accompanying document, Next Steps to Make Work Pay. These measures aim to modernise the labour market, enhance employment protections, and support sustainable economic growth.

The Bill is extensive, spanning nearly 150 pages, and will take time to fully grasp its implications. Fortunately, there is time to review and influence the legislation, as a briefing from the Department for Business and Trade today indicated that implementation is not expected before 2026, with some major reforms, such as changes to unfair dismissal rights, not anticipated until autumn 2026.

One of the planned consultations will address clarifying the employment status of workers, including agency workers. The goal is to explore how a single ‘worker’ status can be effectively implemented.

Key Messages:

The reforms are intended to apply to agency workers. A consultation on how to implement this is expected soon and will guide the drafting of the final Act.
As expected, much of the detail is not yet specified in the Bill. Important terms like ‘reasonable’ and ‘minimum’ remain undefined.
Detailed consultations are scheduled throughout 2025 to shape the Regulations required for the legislation. Implementation is expected in 2026, providing ample time for stakeholders to influence and refine the final shape of the law.

Included in the Employment Rights Bill:

Right to Guaranteed Hours: Employers must offer guaranteed hours to qualifying workers on zero-hours contracts, or contracts with minimal hours, based on the actual hours worked during a 12-week reference period.
Shift Notice and Compensation: Workers on zero-hours contracts or those without specific work schedules are entitled to reasonable notice for shifts, changes, or cancellations, with the right to compensation for cancelled, moved, or shortened shifts.
Right Not to Be Unfairly Dismissed: This becomes a day-one right for all workers. Employers can use a probationary period of up to 9 months, allowing dismissal without the full procedure, provided written reasons are given.
Flexible Working as Default: Flexible work arrangements will be the default, except in roles where it is not reasonably feasible.
Statutory Sick Pay Reform: Expanding eligibility by removing the lower earnings threshold and reducing waiting periods.
Parental Leave: Immediate access to paternity leave and unpaid parental leave from day one.
Enhanced Pregnancy Protections: Strengthens protections for pregnant women and new mothers against dismissal and discrimination.
Bereavement Leave: Establishes a statutory right for employees to take time off following a bereavement.
Fair Pay Agreements: A framework for fair pay agreements will be introduced, beginning with the adult social care sector, enabling collective negotiations on pay and conditions.
Establishment of the Fair Work Agency: A new agency will oversee compliance with minimum wage laws, tackle labour exploitation, and enforce holiday pay policies. This is not expected before 2026.

Updates on Legislation and Policy

The Association of Labour Providers (ALP), Association of Professional Staffing Companies (APSCo), Recruitment & Employment Confederation (REC), and The Employment Agents Movement (TEAM) have come together to urge the government to protect the UK’s temporary agency work and professional contracting sector amid potential legislative and regulatory changes.

In a joint letter to the Secretary of State for Business and Trade, the organisations underscored the critical importance of temporary agency work to the UK economy. Supporting around one million workers daily, the sector enables the flexibility and adaptability necessary to maintain a dynamic workforce. The letter highlights several key benefits that temporary agency work offers to both workers and businesses:

Pathways to Employment: Temporary agency work provides an important entry point for individuals facing barriers to permanent employment, such as young people, career changers, and those returning from career breaks. It often leads to permanent roles, helping individuals gain valuable experience and build long-term careers.
Economic Resilience: During periods of economic uncertainty, temporary agency workers play a vital role. This was particularly evident during the COVID-19 pandemic when temporary workers were crucial in maintaining essential services. The sector’s ability to support businesses through fluctuating demands strengthens the UK’s economic stability.
Work-Life Balance and Flexibility: Many workers choose temporary agency roles for the flexibility they provide, allowing them to balance personal commitments, pursue education, or manage health conditions while maintaining employment.
Business Adaptability: Temporary workers allow businesses to adjust their workforce size in response to shifting demands, seasonal trends, or unexpected challenges. This flexibility is especially critical in sectors like healthcare, logistics, agriculture, hospitality, and education.

The organisations caution that overly restrictive regulations could destabilise the sector, leading to a loss of flexibility, increased unemployment, and slower economic growth. They are calling for the government to:

Recognise and Protect the Sector: Acknowledge the unique role of temporary agency work in future legislation.
Collaborate with Experts: Engage with industry leaders to ensure regulatory changes are balanced and preserve the flexibility that benefits both workers and businesses.
Promote the Sector’s Benefits: Raise awareness of temporary agency work as a legitimate and valuable form of employment.
Focus on Worker Protection: Prioritise the protection of vulnerable workers while avoiding complex regulations that could hinder business growth.
Enforce Existing Regulations: Strengthen enforcement of current regulations to protect workers and support responsible businesses.

In closing, the letter reiterates the crucial role of temporary agency work in maintaining a flexible, adaptable workforce that is essential to the continued success of the UK economy.

A record number of young people in the UK are out of work due to long-term sickness, with figures up 29% since the pandemic. Nearly 900,000 young people are not in education, employment, or training (NEET), a rise of 74,000 over the past year. Latest data from the Office for National Statistics (ONS) shows around 600,000 16-24-year-olds are unemployed—63,000 more than pre-pandemic levels.

The increase in long-term sickness among 16-24-year-olds is particularly concerning, with the number of inactive and long-term sick youth rising from 184,000 pre-pandemic to a record 237,000.

Addressing the issue at the launch of a report by the Institute for Employment Studies (IES), Minister for Employment Alison McGovern pledged to overhaul the employment system, stating that the country has focused too much on welfare and not enough on helping people into work. McGovern compared the current employment challenges to past eras of mass unemployment, with 2.8 million people out of work due to illness and over nine million economically inactive.

The government is set to introduce the Get Britain Working White Paper this autumn, aimed at transforming job centres, creating a Youth Guarantee to provide work, apprenticeships, and skills training for young people, and devolving powers to local leaders to deliver tailored work, health, and skills plans. These reforms are part of the government’s national growth strategy, with the Prime Minister aiming to achieve the highest sustained growth in the G7.

The government’s actions, including the launch of Skills England and plans to cut NHS waiting times, are part of broader efforts to boost workforce participation and reach an 80% employment rate. The White Paper is expected to outline a comprehensive strategy to address these challenges and ensure young people are not left behind.

Immigration Policy

The government has published the latest immigration statistics. In the year ending June 2024, 1.16 million visas were granted for work, study or family reasons (including dependants). In the same period, 38,784 people were detected arriving in the UK by irregular routes. 5,167 people were granted permission to come to the UK by safe and legal routes such as the Ukraine and BN(O) schemes, refugee resettlement and family reunion and 45,886 were granted ‘Other’ visas.

Under the EU Settlement Scheme, there have been 8.1 million EU Settlement Scheme (EUSS) applications made by 6.3 million people since the scheme launched up to 30 June 2024. 7.9 million applications have been concluded since the scheme launched up to 30 June 2024, of which 50% (3.9 million) were granted settled status, 36% (2.8 million) were granted pre-settled status and 15% had other outcomes.

The number of employers who had their skilled worker visa sponsorship licence cancelled in the second quarter of 2024 reached 1,023, compared to just 519 in the first quarter, according to the latest Home Office data.Of the employers who lost their sponsorship licence in the second quarter, 524 had it suspended, while 499 were revoked. These figures mark a dramatic increase compared to the second quarter of 2023, when just 89 employers had their licence suspended and 28 had it revoked.Over the past few years, UK Visas and Immigration (UKVI) has made it clear that enforcing sponsor compliance is their top priority to curb perceived abuses of the sponsor licence system.

The Migration Observatory published its briefing on Work visas and migrant workers. Key findings:

Non-EU work visa grants grew strongly between 2021 and 2023, with the sharpest growth in the Skilled Worker visa category. Visa grants to some groups of Skilled Workers fell sharply in early 2024 following a series of policy changes
The health and social care sector accounted for over 60% of Skilled Worker visa grants in the year ending March 2024, and was largely shielded from 2024 increases in salary thresholds
There is widespread qualitative evidence of exploitation of migrant workers. The risks are higher when migrants’ visas are tied to their employers or where their work is low-paid or isolated
By the end of 2023, students had started to stay in the UK longer after their studies, compared to pre-Brexit trends
Indian citizens were the largest recipients of work visas in 2023, followed by citizens of Nigeria

Commentary

Maria Miller – Operations Director (Maria.Miller@gempartnership.com)

GEM are looking forward to working with our clients advising on all forthcoming changes initiated from the Employment Rights Bill and associated policy changes, impacting our industry sector. As a training provider we are also working with all relevant governing bodies to stay at the forefront of changes by Skills England. GEM hold direct funding and are able to support with a range of upskilling and staff development programmes to aid your workforce development.

I would welcome the opportunity to discuss the changing landscape with you and outline the support and programmes we offer that can enhance your People plans.

References

https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment

https://youthfuturesfoundation.org/wp-content/uploads/2024/08/Youth-Employment-2024-Outlook.pdf

https://www.theguardian.com/money/article/2024/aug/29/uk-graduates-struggle-job-market

https://publications.parliament.uk/pa/bills/cbill/59-01/0011/240011.pdf

https://www.gov.uk/government/publications/next-steps-to-make-work-pay

https://cebr.com/uk-economic-outlook/https://www.lancaster.ac.uk/work-foundation/publications/working-together

https://www.gov.uk/government/statistics/immigration-system-statistics-year-ending-june-2024/summary-of-latest-statistics

https://www.gov.uk/government/publications/sponsorship-transparency-data-q2-2024

https://migrationobservatory.ox.ac.uk/resources/briefings/work-visas-and-migrant-workers-in-the-uk/

https://kpmg.com/uk/en/home/media/press-releases/2024/10/uk-report-on-jobs.html

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