Southampton: Companies’ hiring intentions to hit all-time high, says BDO

Companies’ hiring intentions are set to rise to a record high in Q3 2014, according to the latest Business Trends report by accountants and business advisers BDO LLP in Southampton.

The BDO Employment Index, which predicts businesses’ hiring intentions over the next three months, jumped to 107.7 in May from 105.6 in April. This is only just below the previous peak in Business Trends’ 22-year history, a reading of 108.9 recorded in February 2007. It indicates that companies plan to continue bolstering workforces above the long-term average rate over the next three months.

While this will be welcome, there is the risk that skills shortages will emerge in certain sectors. Strong growth among UK manufacturers in particular could be at risk. BDO’s Manufacturing Optimism sub-Index, which looks at manufacturers’ growth expectations over the next six months, rose to 121.0 in May, well above the 100 mark that reflects long-run average growth.

Commenting on the findings, Malcolm Thixton, lead partner and head of BDO LLP in Southampton, said: “Businesses are translating their confidence in economic recovery into action, demonstrated by the sustained increase in hiring expectations. But a gap between supply and demand for skilled workers is developing, which could take the momentum out of the recovery.”

Looking at the economy more broadly, the BDO Output Index, which predicts businesses’ growth expectations over the next three months, rose from 103.0 in April to 103.3 in May, just short of its May 2006 peak of 103.6. The Manufacturing Output Sub-Index again outperformed that of the services sector, as it has done every month this year, although both sectors expect output to expand above the long-term growth rate, pointing towards continued improvement in the economy in the coming months.

Thixton continued: “With manufacturing growth slowing across the eurozone and unemployment levels remaining high, we have a ready pool of able workers on our doorstep. Politicians must take this into consideration when planning any changes to immigration policy.”