Executive Search in the UK – 2015 Outlook
Job Focus Shifts to Contract Work
Executive Search in the UK, handcuffed by the indecision in hiring that has been par for the course since the Global meltdown, faces more uncertainty going forward.
That’s because the need for flexibility and agility from the perspective of business owners is driving an increasing trend away from jobs and in the direction of getting work done. This means more work supplying contractors (whether they are called Interim Executives, consultants or contractors) over fulltime positions
Short term, previous decisions are driving the distressed purchase of experienced former executives and other specialists. Networks are usually the first source for these enquiries which puts emphasis on maintaining front of mind awareness with all current and previous clients.
Right now, the forthcoming General Election in the UK does not seem to have further heightened the indecision about hiring decisions. The Oil Price Crash may be cheering consumers up but it doesnt seem to have raised business confidence greatly.
UK Wages and Productivity
According to Eurostat, the UK is now officially a low wage economy compared to our European neighbours. This is partly due to the weakness of sterling against the Euro, but the average hourly cost of employing someone in Spain was 21.10 Euro last year. For the UK it was 20.90 Euro.
The EU average is 23.70 euro per hour. Between 2008 and 2013 the UK average labour cost was flat. In the EU it rose 10%. These figures include non-wage costs such as social taxes.
The exchange rate is a significant factor in these numbers. Over the period it fell from 1.50 euro to 1.10 in 2009. Today it is 1.33
For an international company looking for a European base, the UK is now, from a labour cost point of view, cheaper than Poland and the Czech Republic and significantly more business friendly than France.
But the threat of ‘business unfriendly’ policies espoused by the Labour leadership may well be putting a hold on inward investment plans for the time being.
Previously successful Labour leaders, i.e. ones that got elected, are also lukewarm about the current leadership.
It is clear that the UK Government’s changes to social welfare are causing individuals to take work at previously unacceptable pay rates. More in line with the US – the only strong growth economy in the Western world.
This explains the significant fall in UK unemployment. But this is unskilled activity with a negative effect on overall productivity. And the economy needs higher wages which are currently not justified by productivity.
The only way to break this cycle is to ensure final demand is strong enough to move the bargaining power in favour of the employee. In some sectors this is already happening e.g. skilled construction workers and specialist personnel in the service industry.
The UK has enjoyed strong nominal GDP growth caused by an increase in the velocity of money, sustained through 2014 by greater debt but now needing wage awards to rise in order to continue the momentum. This is now beginning to happen – what a surprise with a General Election in prospect.
The oil price collapse is generally good for the UK as a net importer but may have a slowing effect on the investment in fracking in the UK
We now know that Europe will see quantitative easing during 2015 and with it a devaluation of the Euro, mostly against a stronger Dollar as the Fed begins to raise rates and continues to taper its money creation.
The Global geopolitical scene is likely to cause stock markets to lose some of the massive (mostly unjustified) gains, but there is no clarity about when and by how much.
In comparison, the USA is back as the biggest and strongest economy on the earth. It will also have the most resilient banking system by 2017.