Crystal Umbrella

New research by Clydesdale Bank has shown that confidence is rising amongst employers and contractors. This fresh belief that the economy can recover comes at a time when figures suggest that employment is growing for the first time since the recession hit.

Data received from the Clydesdale Bank research showed that ninety per cent of those polled expressed optimism for the future, while one thirds of businesses believed that they could survive in these tough economic times.

Mike Williams, Clydesale Bank Executive said of the research: “This is a positive sign: where confidence exists, growth often follows. It has clearly been a challenging time for businesses, but these figures show there are signs of stability creeping into the market but it is still important to retain a grounded and cautious perspective as the market changes.”

Further evidence that things are improving comes from data compiled by the Recruitment and Employment Confederation (REC) and KPMG. According to these statistics, permanent employment grew in the month of August for the first time in nearly a year and a half. There was also a growth in the number of contractor positions for the first time in over a year. August also recorded less salary reductions than previous months.

Despite the positive connotations of this data, Bernard Brown, partner and head of business services at KPMG warned that it is “too early to speculate”.

He continued: “Given that employment costs are a substantial element of public sector spending, you would expect significant pressure on those costs going forward. This is likely to have a significant impact on the UK jobs market.”

The rate of VAT was reduced to 15% at the height of the country’s economic downturn. At the time, the chancellor warned that it would revert back to 17.5% as soon as the economy showed signs of recovery. HMRC have now confirmed that this will happen on 1^st January 2010. This will affect the majority of businesses from the stroke of midnight at New Year. The only exception will be pubs and clubs who operate through the night. However, tax experts have said that such businesses can only expect a few hours grace period from HMRC before they will have to apply the full rate.

HMRC have issued guidance to support businesses through the transition of reverting back to the original VAT rate. It is expected that the change will cost businesses in the region of £125m.

Choosing to increase VAT on New Years’ Day has been met with criticism from business groups and economists alike.

George Bull, from accountancy group Baker Tilly, spoke to the Financial Times about the impending increase. He said that he believed that the VAT cut had failed to achieve an increase in consumer spending as had been hoped. He believes this is the reason why the reduction looks set to be cancelled at the turn of the year.

For many, it’s hardly surprising as recent indications suggest that the decrease barely impacted upon consumer spending. Although for campaigners wanting to postpone the imminent VAT rise, the refusal to prolong the period is seen as a significant disappointment.

Parity Group, which provides IT services and recruitment, has announced their interim results for the period ending 30^th June 2009. Their results show that the Group continued to experience “difficult trading conditions” during this period. This is further evidence that the IT sector has a long way to go before it recovers from the current economic downturn.

Parity Group’s revenue was £62.8m, down from £66.3m in the same period last year. Their operating profit had dropped from £735k last year to £336k in this period. The Group has been focussed on cutting costs over this period. This has included the closure of two offices, in Leeds and Hemel Hempstead.

Chief executive of Parity, Alwyn Welch, made the following comments on the results: “We are continuing to experience difficult trading conditions due to the severity of the recession. Demand for skills in our areas of focus in Resources has held well, whilst the discretionary nature of much of Solutions’ business means that market has continued to see extended procurement cycles, project delays and cancellations.”

He continued: “We expect market conditions to remain difficult during the remainder of this year and the first half of 2010. We will therefore continue to manage with care, balancing the need to retain and motivate our staff and to invest in sales capacity to compete, with the need to be prudent, which has so far delivered a resilient performance in Resources and an improving situation in Solutions. Management’s expectations for trading performance for the year remain unchanged.”

Monster.co.uk have launched their ‘Keep the UK Working’ initiative with research into the current work practices within the UK. This survey has found that all workers, including freelance workers and contractors, are looking at the skills they have and deciding whether they need to re-train, or work in different sectors, in order to effectively recession-proof their work.

Product director for Monster, James Brian, commented that due to the current economic downturn, many workers feel like they are “waiting for the axe to fall”. This aim of recession-proofing careers has led to contractors and permanent workers alike to take “decisive action” in a bid to prevent this.

Brian continued, “These people are looking at their skills sets and are re-evaluating where it is they could be working so that they have a less interrupted career going forward.”

The research has also shown that twenty per cent of workers in the UK have considered a change of career altogether as a result of the recession. With regards to workers who have  been made redundant, over two thirds of respondents to the survey claimed that they would be looking for a career change. One third of those looking to change career said that this was in a bid to get better wages, this was closely followed by increased job security (cited by 28% of respondents).

Redundancies and unemployment are still on the increase with government figures confirming that UK unemployment had reached 2.43 million between April and June this year.

Monster’s Keep the UK Working Initiative will be coming to a city near you throughout September. The aim is for job-seekers to have the opportunity to meet with recruiters. Further details can be found at www.monster.co.uk

The Institute for Chartered Accountants in England and Wales (ICAEW) recently conducted their Business Confidence Monitor (BCM) survey which resulted in the first positive reading for two year. The findings concluded that optimism had increased from -28.2 to +4.8. Some have commented that the results of this survey, amongst others, show that Britain is now coming out of the recession.

As a response to these claims, the ‘Recruiter’ has spoken to several recruiters throughout the country to get their thoughts, which have been mixed.

Managing Director of Armstrong Human Resource in Oxfordshire said, “I think there is certainly some movement going on. August is a particularly difficult month anyway. You can’t gauge what’s happening at the moment. Our temporary workforce is building up but whether the recession is over, I am not sure about that.”

Director of Conceptuality, Spencer Symons was much more positive, commenting: “January to mid April was pretty horrendous. Since then it has been pretty fantastic. We have got more vacancies than we have ever had. We placed more vacancies on contract on perm in IT and engineering in the past three months than we have in any previous year. We are also recruiting consultants for the first time in eight months.”

However, the director of Brightwork Specialist Recruitment, Shan Saba was certainly not as positive, stating: “The feeling we get from our clients is that it is far from over. Our client base in the surveys we have been conducting is there is more to come and it is not going to get better sooner.”

Only time will tell whether the increased optimism from the Business Confidence Monitor is warranted.

According to new research released by Begbies Traynor, over the past year the number of recruiters experiencing financial difficulty more than doubled.

Begbies Traynor, a firm which specialises in business rescue, recovery and restructuring carried out research which found that the number of firms who were experiencing critical financial difficulties in the second quarter of 2008 was 24 and over the past 12 months this number has increased to 55 – an increase of 129 per cent. Their research also concluded that the number of firms experiencing significant financial problems increased by 90 per cent between the second quarter of last year and the same period this year. There has also been an increase of 67 per cent in the number of recruiters experiencing critical financial problems between the first and second quarters of 2009.

These critical problems are defined by Begbies Taylor as companies who have County Court Judgements equating to £5,000 or more and or claims relating to wind-up petitions. Companies with significant problems are those who have insolvent or out of date accounts and/or court actions.

Partner at Begbies Traynor, Nick Hood commented: “Recruitment companies serving all levels of the job market are now starting to feel the severity of the economic downturn and as we approach the seasonally quieter summer period, this may be the tolling bell for severely struggling companies.”

He continued, “Over the medium term, the situation will only worsen as unemployment is a lagging indicator and its full effects are not going to be seen until even later in the recession.”

The British Chambers of Commerce (BCC) has carried out their annual Economic Study, which shows that the worst of the recession could be behind us.

According to their findings, manufacturers have coped better with the economic downturn than services based on Q2, however; overall the manufacturing sector is in a worse condition. Based on a comparison of this years and last year’s Q3, turnover confidence has risen 40 points for manufacturing firms, from -38 in Q1 to +2 in Q2.

Despite both sectors aiming to hire again, the BCC is predicting that by the mid-2010 unemployment rates will be at 3.2 million.

Speaking about their findings, Director at the British Chambers of Commerce, David Frost said, “These results are sending Gordon Brown and Alistair Darling a strong message from the business community. It is absolutely vital that the improvement in business confidence is nurtured.”

He continued, “Our economy is based on confidence, and wealth creating businesses need to know they will be given the freedom and flexibility to drive the UK out of recession and into a sustainable recovery.”

Chief economist at the BCC, David Kern added, “The pace of decline in the UK economy is clearly moderating. The worst phase of the recession is over, but serious downward pressures persist across all sectors and regions. Most key balances are still in negative territory and remain weak by historical standards. Recovery is now possible but it is not yet secure. Further corrective measures are still needed to support the economy. The marked improvement in confidence, albeit from exceptionally low levels, is welcome. However, these recent gains can only be sustained if the economy continues to stabilise and the recession ends.”