The CIPD Claims The UK Is Suffering From A "Productivity Hangover" That Will Slow Job Growth.

The Chartered Institute of Personnel and Development (CIPD) has released a new survey that shows employment growth could be set to slow.

A survey of 1,000 employers shows that while recruitment intentions are positive, the rate at which companies plan to hire will reduce in the coming months.

This comes after the UK saw a record drop in unemployment, with the jobless figure standing at 7.1 per cent - just below the Bank of England's target level for any potential change in the country's interest rate.

The main causal factor behind this slowdown, according to the CIPD, will be the so-called productivity hangover, which is the theory that companies hired excessively during the recession because of cheap labour costs - resulting in lower than expected turnover-per-person.

But while larger corporations struggle to justify new hires, the survey showed that SMEs are optimistic about the UK's economy, with a benchmark of +40 recorded for small businesses compared to +5 for bigger firms. Any figure above 0 indicates growth.

Gerwyn Davies, labour market adviser at the CIPD, claimed that the news should not come as a surprise given the fact that employment figures have boomed in recent months.

"Although the immediate jobs outlook remains bright, it looks as though the vast majority of workers will at best experience a standstill in real earnings," Mr Davies added.

"The challenge for managers will be to find ways to continue motivating employees who find their pay lagging behind inflation, and in many cases are struggling to pay bills and mortgages."

Researchers at the CIPD recently argued that a "trust deficit" is holding back the UK economy.

A report released by the organisation showed that only 37 per cent of employees trust their bosses, meaning they are more likely to seek positions at other companies, which disrupts the economy.

The same study also showed only 38 per cent of firms use the word "trust" often, with many preferring to use less emotive words.

Expert Opinion

The results of this survey are interesting and the findings about overall growth again highlight that we cannot take anything for granted as the economy improves. <br/> <br/>“Despite this so called ‘productivity hangover’, on the plus side the CIPD has highlighted that SMEs remain optimistic about future economic growth. This is something that needs to be supported and as we drive towards creating a more balanced and sustainable economy, smaller firms must have access to expansion finance and be encouraged to seek out opportunities overseas and export their goods and services. <br/> <br/>“Growth is good, but it needs to be the right type of growth. SMEs have a huge role to play in job creation in the future, but it is vital that business owners have access to expert professional advice in order to ensure that they make informed choices as they build their businesses .” <br/> Fergal Dowling - Partner