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Employment trends 2009Work patterns in the recession

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Overview 04

The employment landscape 06

Background to the survey 07

1 Companies are controlling costs tightly 08

2 Graduate recruitment plans: employers are taking action to engage 12 graduate talent

3 Changes in work patterns have been vital in helping companies 16 weather the economic storm

4 Business continues to value training – but support is required 20 to maintain investment

Contents

3CBI | Employment trends 2009 – Work patterns in the recession

Companies are controlling costs tightly

The pace and severity of decline in the economy has meant companies have to control staff costs closely to remain viable. Most employers plan pay freezes or only moderate increases in pay during the next pay round.

While difficult economic conditions are likely to mean lower bonuses in the coming years, the majority of employers are not planning to change their bonus schemes – although restructuring of schemes was common in some sectors.

Employers are also maintaining the value of redundancy packages – more than 90% plan to preserve or improve their existing schemes. Making employees redundant is not only a difficult decision but also an expensive one, with the average redundancy payment totalling £12,000.

Recruitment is slow and is likely to remain so for some time – nearly two-thirds of employers are operating some form of recruitment freeze and there is uncertainty about when conditions might improve.

Overview

Graduate recruitment: employers are taking action to engage graduate talent

While graduates are still in demand, particularly in certain sectors, their employment prospects are being affected by the recession – two fifths (38%) of employers have frozen graduate recruitment and a further 10% are recruiting fewer graduates than last year.

But graduates should stay positive to take advantage of new opportunities – one in twenty companies (5%) plan to increase their graduate recruitment and employers are finding innovative ways to engage graduates. One in six (16%), for example, are providing internships and placements.

The CBI first published its Employment Trends Survey eleven years ago in the second year of a Labour Government with an ambitious agenda for employment policy. The subsequent decade has seen significant changes in the workplace and labour market – new workplace rights, increased flexible working and progress on diversity to give a few examples – but no previous survey has marked such pronounced changes in outlook as this year. The recession has presented many employers with

unprecedented challenges and they have had to make some difficult decisions. But while the downturn has inevitably caused rising unemployment and has impacted on key HR indicators like recruitment, training and pay, what is striking – and encouraging – is the extent to which organisations and their employees have shown flexibility and adaptability to achieve cost savings while preserving jobs wherever possible.

4 CBI | Employment trends 2009 – Work patterns in the recession

Changes in work patterns have been vital in helping companies weather the economic storm

Most firms have made or are planning changes to their working patterns to reduce labour costs – the most popular responses were to increase the use of flexible working and cuts in use of agency staff and overtime.

Most businesses remain committed to their UK operations, but a significant minority have moved or are considering moving some jobs or operations overseas in response to the downturn.

Employers felt strongly that to help businesses through recession and save jobs, government should prioritise getting credit flowing and apply a freeze on new employment regulation.

Business continues to value training – but support is required to maintain investment

As with all business investments, training budgets are under considerable pressure as a result of the recession. While nearly half of employers (47%) were leaving training expenditure unchanged and 9% were planning to increase investment, 44% of employers are having to reduce training spend.

But firms are also increasing efforts to ensure there is a productive return on their training spend: two thirds (66%) were targeting their training more effectively and almost half (49%) of firms were providing more training on-the-job or internally.

Firms continue to see value in apprenticeships – and most are planning to maintain their apprenticeship numbers – but a quarter of companies will reduce their apprentice numbers and financial support is needed to help companies continue to invest in apprenticeships.

“ Nearly two-thirds of employers are operating some form of recruitment freeze”


The employment landscape

Since the UK entered recession, unemployment has risen sharply and is set to get worse. The latest official statistics show that the jobless total rose to 2.26m in the first quarter of 2009, and the CBI forecasts that this will peak at over 3m next spring.

The latest official figures also revealed the biggest quarterly fall in employment since comparable records began in 1971 – a drop of 271,000 in the three months to April 2009.1 And claimant count, which reflects the number of people receiving out of work benefits, is now at its highest since July 1997, standing at 1.54m in May 2009.

These are serious concerns for individuals, businesses and government. But becoming unemployed does not mean joining a static pool. Every day, substantial numbers of people become unemployed, while others move out of unemployment into work. Every three months, around 7% of the working-age population moves between economic inactivity, employment and unemployment.2 In just one four-month period in 2009, more than a million people moved off job seekers’ allowance.3

But finding a new job is getting tougher: the latest official statistics show the number of job vacancies fell to a record low of 444,000 in the three months to May 2009.

And the consequences of unemployment are not shared evenly across the economy. While the private sector has contracted – losing 286,000 jobs in the three months to April 2009 to reduce the total to 23 million – the public sector has grown by 15,000 jobs to reach 6.02 million.

Youth unemployment is a particular concern – and one soon to be compounded by the coming influx of school leavers and graduates onto a depressed jobs market. At 16.6%, the unemployment rate among 18 to 24 year-olds in the three months to April was the highest it has been since 1993.

But unemployment is only one aspect of the wider labour market picture. For those employees who remain in a job, and for employers struggling to protect jobs while keeping a viable business running, the employment landscape has changed markedly since the last recession. Flexible working practices have given organisations and their staff more freedom to adapt to changing demand and individual needs, while pay, recruitment and staff training costs have all come under the pressures of a slowing economy and a weak jobs market.

This report looks beyond the jobless totals to investigate how organisations across the UK and in all sectors are changing their employment practices to weather the recession.

1 ONS Labour market statistics, 17 June 2009.

2 P Gomes, Labour Market Flows: Facts from the United Kingdom, Bank of England Working Paper 367, April 2009

3 Hansard, Col 539, 11 May 2009


Background to the survey

The survey covers a cross-section of employers

• In all industry sectors…

• …all regions…

• …and all sizes of organization

The CBI/Harvey Nash work patterns in the recession survey represents a new format and methodology for our established Employment Trends Survey, first published in 1998. In order to capture the changing face of the recession and its effect on employment, the survey will be conducted twice during 2009.

This report details results from the first survey, conducted in April and May 2009. There were 704 respondents, who between them employ nearly three million people. Respondents came from a wide range of organisations, covering all sectors of the economy, including the public sector.

The survey was completed by senior executives. In larger organisations, this tended to be the human resources director or equivalent, while in smaller and medium-sized organisations this was more often a managing director, chief executive or chairman.

Sectoral analysisThere was a wide spread of responses from organisations across all sectors of the UK economy (Exhibit 1). Manufacturing provided the largest sectoral response (22%), but responses from professional services sector (eg law and consultancy firms) and science, hi-tech & IT sectors also made up a large proportions of the response. Public sector bodies made up 8% of the responses – it should be noted this is low when compared to their presence across the UK economy.

Respondents by company sizeOrganisations of all sizes participated in the survey – nearly a quarter (23%) employed fewer than 50 staff and 13% employed more than 5,000 (Exhibit 2). The largest representation came from enterprises employing between 500 and 4,999 employees, making up 30% of the sample. Official data suggests that the majority of UK businesses employ fewer than 50 staff. Like most surveys our sample therefore over-represents large businesses. But since large firms employ nearly half the workforce, the survey broadly reflects overall employment practices.


Exhibit � Respondents by economic sector (%)

Hospitality �.�

Agriculture �Energy & water �Transport & distribution �

Construction �

Other �

Retail �

Other services �

Banking, finance& insurance �

Public sector �Science/Hi Tech/IT ��

Professional services (law, consultancy etc) ��

Manufacturing ��

��+ ��

��-��

��-��

��-��

�-��

Exhibit � Respondents by company size (%)

1 Companies are controlling costs tightly

The pace and severity of decline in the economy has meant companies have to control staff costs closely to remain viable.

Key findings• Most employers plan pay freezes or only moderate increases

in pay during the next pay round

• While difficult economic conditions are likely to mean lower bonuses in the coming years, the majority of employers are not planning to change their bonus schemes, though in some sectors restructuring is common

• Making employees redundant is not only a difficult decision but also an expensive one, with the average redundancy payment totalling £12,000.

Most firms plan a pay freeze or only a modest pay rise in the coming yearThe economic downturn has placed severe cost constraints on businesses across the UK economy. Looking ahead to their next pay round, more than half (55%) foresaw a pay freeze (Exhibit 3). Against a backdrop of low or negative inflation, a further 39% plan to award their employees a modest increase.

Reflecting the character of this recession, plans for pay freezes were most prevalent in the construction (82%), manufacturing (64%), retail (62%) professional services (60%), other services (60%) and hi-tech, science & IT (60%) sectors. They were prevalent in all sizes of employer – with the smallest (60%) and largest (55%) companies most likely to be operating a pay freeze.

A third of bonus schemes have been restructuredAcross the wider economy, bonuses and other performance-related rewards remain a vital tool for organisations. In times of economic difficulty, a sensible bonus structure is a fair way of distributing the resources available to reward and retain the best performing staff. The majority of companies (62%) have maintained their bonus structures in spite of recession – although it is likely in the current economic climate that many bonus payments will be lower than in previous years (Exhibit 4). Around a quarter (24%) of employers have reduced the average value of their bonus schemes through restructuring, while a further 10% have restructured their schemes but maintained the average value.

Increased in averagevalue �Restructured but

maintained averagevalue ��

Reduced in averagevalue ��

No change��

Exhibit � Changes made to bonus structures as a result of the economic downturn (%)

General significantincrease �

Negotiated reduction �

General modest increase �� Pay freeze

��

Exhibit � Organisations’ plans for their nextpay review (%)


While average redundancy payments varied by sector and will be largely driven by length of service, the data shows that redundancy is costly for the employer. The average payment of £12,100 equates to around half a year’s average salary.4 When other costs such as recruiting, training and developing that employee, any subsequent replacement in future, and any costs due to reduced staff morale are taken into account, this figure is likely to be higher still. Redundancy is an expensive exercise and one which employers only undertake as a last resort.

Many commentators have suggested that bonus structures within some financial institutions have encouraged excessive risk-taking and short-termism. It is perhaps unsurprising, therefore, that restructuring and reduction in value of bonus structures was most common among banking, finance & insurance firms: 46% have reduced the average value of their bonus structure and a further 10% have restructured their bonuses to reflect a changing approach to risk and reward. A large portion of construction firms have also reduced the average value of bonuses (37% ), as have the largest employers with 5,000 or more employees (46%).

Employers have maintained the value of redundancy packagesAsked whether they had made changes to their redundancy packages as a result of the downturn, nine in ten employers had maintained the value of their redundancy packages. Of those who had made changes, 6% had reduced the average value and 2% respectively had either increased the value of the package or restructured it.

Redundancy payments were varied but the average was around £12kEmployers were asked to provide details, either actual or estimated, of the average value of a redundancy package since the beginning of 2009. Ten per cent were able to provide actual data, while a further 32% provided an estimate. Overall, the average cost of redundancy payments per employee was just over £12,100, but averages varied considerably by sector, region and size of employer. The highest average redundancy payments were found in banking, finance & insurance (£21,300), in professional services, energy & water and retail (all £12,500). Higher redundancy payment averages were also found in organisations with more than 5,000 staff (£23,700) and in multinational companies (£21,200). The lowest average redundancy payments were found in the construction (£5,700) and other services (£3,900) sectors, and in the smallest organisations (£5,200).

Reduced in averagevalue �

Restructured butmaintained average value �

Increased inaverage value �

No change��

Exhibit � Changes made to standard redundancypackages as a result of the economic downturn (%)

4 According to the Office of National Statistics Annual Survey of Hours and Earnings (ASHE) 2008, median gross weekly earnings for April 2008 were £479 for full-time employee jobs on adult rates whose earnings were not affected by absence – meaning an average annual earnings of £24,908.


Nearly two thirds of employers are operating a recruitment freeze Nearly two thirds (61%) of employers reported a recruitment freeze was in place across their whole organisation (30%) or in parts of their organisation (31%) – Exhibit 6.

Employers in the construction sector were most likely to be operating either a partial or organisation-wide recruitment freeze (81%), followed by manufacturing (70%) – Exhibit 7. Manufacturing employers were most likely to have an organisation-wide recruitment freeze in place (44%). But recruitment freezes were less common in the public sector, where over half (56%) of organisations were still hiring.

The prevalence of recruitment freezes across the economy correlated most closely with employer size (Exhibit 8). The smaller the employer, the more likely it was that a recruitment freeze would be in place: in the smallest employers with fewer than 50 staff, three quarters of firms (74%) had either a partial or organisation-wide freeze on recruitment, whereas in the largest employers (5,000+), the proportion operating some form of freeze fell to 42%.

Recruitment in 2009 will lag behind 2008 and 2007 levelsEmployers were asked how they expect recruitment in 2009 to compare with recruitment in 2007 and 2008. Nearly one third (32%) felt it would be lower, while just under a quarter of employers (22%) expect recruitment to be higher in 2009 than in 2008 – a balance of 10% expecting lower recruitment. Only in the public sector and other services sector was the balance of expectation positive (by +8% and +26%).

Pessimism about recruitment in 2009 was closely linked to company size. The largest employers were least likely to expect recruitment to be higher than in 2008 – a balance of 46% felt it would be lower. Only the smallest employers were positive overall, with a balance of 19% expecting recruitment in 2009 to exceed 2008.

No freeze ��

...in some parts of the organisation ��

...across organisation ��

Exhibit � Percentage of organisations operating a recruitment freeze... (%)

Exhibit 7 Percentage of organisations operating a recruitment freeze by sector (%)

Overall Construction ManufacturingScience / Hi

Tech /ITPrivate sector

averageBanking, finance

& insurance

Professional services (law,

consultancy etc) Public sector

Yes, across organisation 30 39 44 32 31 22 29 10

Yes, in some parts of the organisation 31 42 26 34 31 37 25 34

Total operating some form of recruitment freeze

61 81 70 66 62 59 54 44

No 39 19 29 34 38 41 46 56

Base: 660


Employers were also negative about recruitment compared with 2007, although the picture was more mixed. While more than a quarter (27%) of employers expected recruitment in 2009 to be higher than in 2007, 38% felt recruitment would be lower than in 2007 – a balance of 11% expecting recruitment to be lower. Employers in the private sector generally felt recruitment would be lower in 2009 than it had been in 2007 (a balance of 14%), whereas public sector respondents generally expected it to be higher than in 2007, by a balance of 12%.

Expectations for a recovery in recruitment are mixed Respondents were asked when they expect recruitment to return to 2007 and 2008 levels. Expectations were very mixed. As Exhibit 9 shows, 18% expected a return to 2008 levels within a year, around a third (32%) expected it within two years, and a further 27% felt unable to give a response.

Employers were even more uncertain about when recruitment might return to 2007 levels: just 9% felt this was likely to happen within a year, around a quarter expected a return within two years (26%) and another quarter felt recovery would be beyond two years (27%). More than a third (35%) were too unsure to give an answer.

The mixed nature of employer expectations – and the high proportion of respondents answering “don’t know” – show the high level of uncertainty about the future economic outlook.

Exhibit 8 Percentage of organisations operating a recruitment freeze by organisation size (%)

1-49 50-199 200-499500-

4,999 5,000+

Yes, across organisation 28 27 33 25 36

Yes, in some parts of the organisation

46 42 32 35 6

Total operating some form of recruitment freeze

74 69 65 60 42

No 25 31 35 40 58

Don't know��

Beyond the next two years �� In the next two

years ��

In �� months ��

Within six months �

Don't know��

Beyond the nexttwo years ��

In the next twoyears ��

In �� months �

Within sixmonths �

Exhibit � Employers' expectations for when recruitment will return to ... (%)

...�� levels

...�� levels


2 Graduate recruitment plans: employers are taking action to engage graduate talent

Graduate talent is important to UK employersGraduates are a vital part of the UK workforce, bringing fresh thinking, analytical skills and new knowledge to businesses. More than a third (36%) of jobs with UK employers require graduate level skills and this is set to grow.5

Even in times of economic uncertainty, having a degree is a valuable asset – university graduates were three times more likely to be in employment than those with the lowest level of education by 2007.6 And over their lifetime graduates can expect to earn a premium – on average graduates earn an additional £160,000 compared to earnings of those with A level qualifications.7 The earnings premium is highest for graduates in engineering and mathematics who can expect to earn over £240, 000 compared to an earnings premium of just £51,549 for humanities graduates.

The recession is having an impact on employment opportunities for graduates. Two fifths (38%) of employers are operating a freeze on graduate recruitment (Exhibit 10). A further 10% are still recruiting graduates but at lower levels than they were last year – the mean decrease in graduate recruitment numbers is 41%.

Employers know that even in times of recession it is important to continue to develop their future talent. Graduate employment remains strong in key sectors and employers are offering new development opportunities through placements and part-time working. While graduate employment in the short term will be affected by the contraction of the jobs market, in the longer term a degree is still a great investment.

Key findings• Graduates are still in demand, particularly in key sectors

• But their employment prospects are being affected by the recession – two fifths (38%) of employers have frozen graduate recruitment and a further 10% are recruiting fewer graduates than last year

• Graduates should stay positive to take advantage of new opportunities – one in twenty (5%) companies are looking to increase their graduate recruitment and one in six employers (16%) are providing internships and placements.

No freeze but level of recruitment not stated ��

Higher than ��level �

Similar to �� level ��

Lower than �� level ��

Recruitment freeze��

Exhibit �� Patterns in graduate numbers (%)

5 CBI/Nord Anglia education and skills survey 2009/Employment trends survey 2008

6 Bank of England

7 Universities UK /PriceWaterhouseCoopers 2007


But graduates should remain positive – a third (34%) of companies are recruiting graduates at similar levels to last year. A further 13% are recruiting but did not state how their plans for this year compare to last year.

One in twenty (5%) companies are looking to increase their graduate recruitment – the mean increase is 33%.

Graduates are still in demand in key sectors The survey shows that graduate opportunities are holding up in certain sectors (Exhibit 11). Most companies (88%) in the energy and water sector have active graduate recruitment, probably reflecting their reliance on key skills that are currently in shortage: late last year three quarters (74%) of employers in the energy and water sector reported that they were experiencing difficulty recruiting graduates and postgraduates in science, technology, engineering and mathematics (STEM) subjects.8

The majority of public sector employers (78%) and those in professional services (72%) have not frozen graduate recruitment. These sectors require a large number of graduates – six out of ten (63%) jobs in professional services require degree-level skills as do four out of ten (43%) jobs with public sector employers.9

But the recession is reducing opportunities in hard-hit sectorsBut it is clear that sectors hardest hit by the current recession are cutting back on graduate recruitment, just as with other recruitment. Over half of companies in transport and distribution (59%) have taken the decision to freeze graduate numbers as contraction in production of goods feeds through to the transport industry. Similarly, over half (54%) of construction companies are putting graduate recruitment on hold, as the sector reacts to declining demand for new build projects. Graduate numbers are also on hold in half (53%) of the manufacturing companies in the survey. These sectors have a lower than average proportion of jobs requiring degree level skills – one fifth (20%) of jobs in manufacturing and a quarter (25%) of jobs in construction require degree level skills.10

Exhibit 11 Organisations operating a freeze on graduate recruitment – by sector (%)

Graduate recruitment freeze

Total 38

Banking, finance & insurance 32

Construction 54

Manufacturing 53

Professional services 28

Science / hi- tech / IT 34

Transport & distribution 59

8 CBI/Nord Anglia Education and skills survey 2009, p33

9 CBI/Nord Anglia Education and skills survey 2009, p27

10 Ibid


The very largest companies are weathering the stormThree quarters (75%) of employers with 5,000 or more employees are still recruiting graduates (Exhibit 12). These large employers are able to continue providing graduate opportunities in the tough economic climate. But the survey shows that the smallest firms are no more likely to be freezing graduate recruitment than medium-sized companies – graduates should therefore be looking for employment opportunities in companies of all sizes.

A mixed picture among employers who haven’t frozen recruitment Most of the companies with active recruitment programmes remain committed to the same levels of graduate recruitment as in 2008 and 2007, with 69% expecting to take on similar graduate numbers to 2008, and 66% expecting similar numbers to 2007 (Exhibit 13).

Employers were asked to state the magnitude of the change in their graduate numbers. Of the 21 employers who gave information on the level of the increase in their graduate recruitment from 2008, the mean increase was 33%. Of the 53 respondents who gave information for the decrease in their graduate numbers, the mean decrease was 41%. A quarter (26%) of the respondents stated that their graduate numbers would be down by between 50% to 69% from their 2008 level of graduate recruitment.

Exhibit 12 Organisations operating a freeze on graduate recruitment – by number of employees (%)

Graduaterecruitment freeze

1 to 49 38

50 to 199 39

200 to 499 39

500 to 4,999 43

5,000+ 25

Exhibit 13 Graduate recruitment levels in key sectors where graduate recruitment not frozen (%)

Higher than 2008

Similar to 2008

Lower than 2008

Total 9 69 21

Banking, finance & insurance 15 70 15

Construction 18 27 55

Manufacturing 11 71 18

Professional services (law, consultancy etc) 2 66 33

Science/Hi Tech/IT 12 54 34

Transport & distribution 0 90 10


One in ten (9%) employers who recruit graduates were offering graduates part-time working or funding for additional study such as Masters degrees (8%). One in fourteen (7%) employers are giving graduates the opportunity to gain experience of different workplaces by providing secondments. A small proportion are seeking to hold on to graduate recruits by offering them a deferred start with pay (2%) or offering a deferred start without pay (1%).

Employers are looking for innovative ways to engage graduate talentIn a tough labour market, graduates need to be thinking of ways they can stand out from the crowd. Employers value relevant work experience and seek graduates demonstrating skills vital for the workplace – such as communication, business awareness and teamwork. Employers are facing difficult decisions, balancing costs and less business against the need to continue to bring fresh talent. While many have taken the decision to freeze recruitment, others are looking for innovative ways to engage graduates – Exhibit 14.

One in six (16%) employers who recruit graduates were offering paid or part-paid internships and placements to graduates in place of formal recruitment. These opportunities were spread across all sectors and size of company.

Graduates entering the labour force this year should make the most of opportunities to gain work experience or support for further study to develop their skills. The government recently announced a package of measures to help graduates in the downturn including the Graduate Talent Pool internship programme to match potential interns with opportunities offered by business and the public sector.

Companies and graduates interested in Graduate Talent Pool can find out more from the CBI higher education website www.cbi.org.uk/highereducation.

Exhibit 14 Organisations offering different opportunities to graduates (%)

%

Paid or part-paid internships/placements instead of formal recruitment

16

Part-time working 9

Funding for additional study (eg Master degree) 8

Secondments 7

Deferred start with pay 2

Deferred start without pay 1

Base: 584

“ While many have taken the decision to freeze recruitment, others are looking for innovative ways to engage graduates”


The majority of firms have made or are planning changes to their working patternsNearly two thirds of employers have made, plan to make, or are considering, changes to the way they organise their workforce and/or in their working patterns in response to the economic downturn (Exhibit 15). Changes to working patterns were most prevalent in the construction sector (where 86% of employers had made or planned changes), but a large proportion of employers in the public sector (75%), manufacturing (70%) hospitality and transport & distribution (both 67%) and other services (65%) sectors had also made or were considering changes.

Faced by tough trading conditions, organisations have had to make difficult decisions to reduce operating costs. One of the striking features of this recession has been the commitment of organisations and their employees to work together, taking innovative steps to reduce labour costs and, wherever possible, save jobs.

Key findings• Most firms have made or are planning changes to their working

patterns to reduce labour costs – the most popular responses were to increase the use of flexible working and cuts in use of agency staff and overtime

• Most businesses remain committed to their UK operations, but a significant minority have moved or are considering moving some jobs or operations overseas in response to the downturn

• Employers felt strongly that to help them through recession and save jobs, government should prioritize getting credit flowing and apply a freeze on new employment regulation.

3 Changes in work patterns have been vital in helping companies weather the economic storm

Exhibit 15 Employers who have made, are planning, or are considering changes in the way they organise their workforce and their working patterns in response to the downturn (%)

Total ConstructionPublic sector Manufacturing Other services

Private sector average

Professional services (law,

consultancy etc)Banking, finance

& insuranceScience/Hi

Tech/IT

Yes 62 86 75 70 66 61 55 50 50

No 38 14 25 30 34 39 45 50 50


Exhibit 16 Measures chosen by companies who have made, intend to make, or are considering changes to working patterns (%)

More flexible

working

Reducing paid

overtime

Reduced use of

agency workers

Cutting shifts

Halted use of

agency workers

Implementing short-

time working

Increased use of

fixed-term contracts

Closing down sites

Other changes

to shift patterns

Bringing forward

annual leave entitlements

Increased use of

agency workers

Reduced use of

fixed-term contracts

Have made 45 43 33 26 25 17 14 13 13 10 7 10

Intend to make 13 7 7 2 2 2 6 2 3 1 3 3

Considering 11 5 4 4 4 11 8 6 4 9 7 3

Have made, intend to make or considering

69 55 44 32 31 30 28 21 20 20 17 16

Not stated/not made or considered

31 44 55 68 69 70 72 79 80 80 83 84

11 UK Business: Activity, Size and Location – September 2008, Office of National Statistics.

Many have increased flexible workingEmployers have taken, plan to take, or are considering, a wide variety of measures to reduce labour costs while saving jobs and retaining skilled employees (Exhibit 16). Increasing the use of flexible working can help employers to reduce working hours or make better use of existing staff resources, while benefitting employees by helping them balance work with their outside lives. It was the most popular change to work organisation and working patterns – more than two thirds of employers had already increased flexible working (45%), intended to (13%), or were considering it (11%).

Among survey respondents, 43% had reduced paid overtime, a third (33%) had reduced agency worker usage, and quarter (26%) had cut some shifts. In a reflection of the severity of recession, nearly one in five employers (17%) had implemented short-time working and 13% had closed down sites.

Employers were also planning or considering further measures in response to the downturn. Of options already planned, flexible working was the most popular (13%), followed by reducing paid overtime (7%) and reduced use of agency workers (7%).

Perhaps unsurprisingly given the extreme pressures facing the sector, short-time working was most likely to have been implemented or planned in the manufacturing sector – 38% have already implemented short-time working and a further 11% are considering the measure. Across the private sector as a whole, 14% of employers have had to make site closures as a result of recession.

Larger employers have a greater number of sites, so it is unsurprising that site closures have occurred more frequently in larger employers than in smaller ones – 21% of organisations with more than 5,000 staff have closed sites. Equally, cutting shifts was a more common among larger employers who would have more scope to do so.

Smaller employers were less likely to have used any of the options for changing work organisation and working patterns, except to increase their use of agency workers (28% had made or were planning or considering this option). This demonstrates two linked points: first, that smaller organisations may inherently have less scope and/or fewer options to flex their labour use, making them potentially more vulnerable to fluctuations in market demand. Second, it demonstrates the unique benefits of the agency worker model and the degree to which smaller employers rely on them. With 97% of organisations in the UK economy employing fewer than 50 staff 11 for whom agency workers constitute a vital resource, the government should be mindful of this dependence as it transposes the EU agency workers directive in UK law.


applicants in the UK. Other sectors where a large number of employers had or might move operations and jobs overseas were the banking, finance and insurance sector (54% had, planned to or were considering), manufacturing (31%) and other services (31%).

Since larger employers are more likely to operate across multiple sites and have multinational operations it is predictable that larger organisations were more likely to have moved or be planning or contemplating moving some jobs or operations overseas. Nearly half (49%) of the largest employers had or were planning to, compared to 14% of the smallest employers.

Nearly one in five plan to move work overseas in response to the downturnThe survey asked employers whether they had moved, planned to, or were considering moving jobs or operations overseas in response to the downturn (Exhibit 17). A quarter of employers (26%) confirmed they had done so or were considering doing so.

Sectors more likely to be moving or considering moving jobs and/or operations overseas were the science, technology & IT sector, with a third (31%) having moved jobs or operations overseas and further 22% planning or considering moves. This may in part reflect of a lack of quality science, technology, engineering and maths

Exhibit 17 Employers who have moved, are planning or are considering moving jobs or operations overseas (%)

Total Science/Hi Tech/ITBanking, finance &

insurance Manufacturing Private sector average ConstructionProfessional services (law, consultancy etc)

Have moved operations/jobs

11 31 24 12 12 8 4

Intend to move operations/jobs

6 11 6 7 6 0 2

Considering moving operations/jobs

9 11 24 12 8 4 0

Total have moved/intend to/considering moving jobs

26 53 54 31 26 12 6


Getting credit flowing and a freeze on new employment regulation should be government priorities to help employers through recessionEmployers were asked what they believe should be the government’s priorities to help preserve employment through the recession (Exhibit 18).

Overwhelmingly, employers felt the government’s main priority should be to focus on getting credit markets working freely so working investment and capital is available at affordable rates.

Concern about the burden of employment regulation comes across strongly in the survey results, with nearly two thirds (64%) of employers saying a freeze on further employment regulation should be a government priority. New employment regulation since 1997 has eroded Britain’s relatively flexible labour market, a key source of competitive advantage. Concern about the excessive burden of employment regulation came out most strongly among manufacturing firms – three quarters (75%) felt a freeze on new regulation should be a priority – and was a greater concern for smaller organisations who may not have the resources to cope with the rising burden.

Enhancing the training support available to employers was also a priority for almost half (48%) of the firms in the survey. Sharpening the skills of the workforce can help firms remain competitive in tough economic conditions, but also positions firms to drive ahead when the upturn comes. Government can provide employers with a welcome helping hand to continue investing in training and it is vital that programmes such as Train to Gain and apprenticeships respond flexibly and support the needs of employers.

Exhibit 18 Areas employers believe should be the government’s focus to preserve employment in the downturn (%)

Total

Getting credit markets working freely so that working and investment capital is available at affordable rates

87

A freeze on all new employment regulation at least until economic conditions improve

64

Enhancing training support available to employers 48


12 National employer skills survey 2007, Learning and Skills Council

4 Business continues to value training – but support is required to maintain investment

While firms were working hard to ensure training does not fall by the wayside, there remains a clear role for government to provide targeted support. For example, Train to Gain, which provides employers with access to skills brokerage and public funding for employees to gain qualifications must respond flexibly to the needs of business. Progress has been made – with a recent package of Train to Gain flexibilities for SMEs providing access to funding for re-training staff and for smaller units of training – but these must now be extended to all firms.

Employers invest £39 billion per year on training their staff 12

and know the importance of developing the skills and talents of their people. Investing in the right skills can help firms remain competitive during the downturn and ensure they are well placed to capitalise on the upturn when it comes. But, as with all business investments, training budgets are under real pressure. Employers remain committed to apprenticeships, but government support is necessary to help maintain training investment.

Key findings• Most employers are maintaining their training investment plans,

but some have had to cut back and additional support is required

• Firms continue to see value in apprenticeships – and most are planning to maintain their apprenticeship numbers – but a quarter of companies will reduce their apprentice numbers. Financial support is a priority to ensure companies continue to invest in apprenticeships.

Firms are looking to target training budgets for maximum returnOur survey shows that employers were working hard to maintain training spend. Many employers (47%) were leaving training expenditure unchanged, while 9% were planning to increase investment (See Exhibit 19). But the impact of the recession is being felt, with 44% of employers having to reduce training spend.

The survey also asked about the strategies firms were employing on training to deal with the downturn. Clearly the priority for firms will be to ensure they realise a productive return on their training spend. To that end, our survey found two thirds (66%) of firms were targeting their training more effectively – focusing training on those areas of their business where they will see the most benefit and which will help them come through the recession (See Exhibit 20).

Almost half (49%) of firms were providing more training on-the-job or internally which can be more cost-effective than releasing staff to attend external training courses. This option was being chosen by firms of all sizes.

No change to training investment ��

Reducing investmentin training ��

Increasing investment in training �

Exhibit �� Impact of downturn on business plansfor training investment (%)

Exhibit �� Training strategies used by firmsin response to downturn (%)

� ��

Other

Providing more training on the job or internally

Targeting training more efficiently��

��

�


Firms continue to see value in apprenticeships – most plan to maintain their apprenticeship numbersApprenticeships are vital to ensure the UK economy emerges from recession in good shape. Apprenticeships represent a significant investment for firms – recent research highlighted that apprenticeships can cost from £2,305 up to £28,762.13 With recent LSC figures showing an 8% fall for 16-18 year-olds in particular, the economic situation is certainly having an impact.14

Over half of firms (58%) said they would preserve their apprenticeship programme (Exhibit 21). This is particularly the case in the sectors where apprenticeships have been successfully introduced and expanded in the last few years – 85% of banking, finance and insurance companies, 75% of businesses in retail, and 69% of employers in professional services, will maintain their apprentice intakes.

But a quarter of companies will reduce their apprentice numbers Only 10% of firms are considering expanding their programme and a quarter of firms (23%) are taking the decision to reduce their apprentice numbers at this time. The construction and manufacturing sectors in particular have been affected – with more than half (58%) of the construction firms surveyed and a quarter (25%) of manufacturers downsizing their schemes.

Larger firms, who are likely to have large apprentice intakes, are deciding to reduce their apprentice numbers – a third (34%) of the largest firms taking this action, in comparison to just 8% of the smallest firms. Smaller companies, with perhaps only a few apprentices, are more likely to choose to cease training apprentices altogether – a quarter (24%) of the smallest firms has resorted to this, whereas none of the largest firms have. Overall, 9% of firms are ending their schemes.

To ensure firms continue to invest in apprenticeships, financial support is a priority With such an uncertain economic outlook as companies plan their apprentice programmes for the coming year, they need support. High quality Group Training Associations (GTAs) can help employers spread the risk of taking on apprentices at this time. Government has opened up £11m of funding, creating a further 3,000 places for employers training more apprentices than they need and £7m is currently available to support more GTAs.

The government has committed to reduce red tape for apprenticeships, with the UK Commission for Employment and Skills undertaking work on the simplification of the skills system. But further progress needs to be made as firms at this time can ill afford the costs that unnecessary bureaucracy creates.

With half of employers (51%) in the CBI’s recent education and skills survey emphasising that incentive payments are needed, the government needs to consider such measures to allow firms to maintain their existing schemes.

13 Warwick IER, 2008, The Net Benefit to Employer Investment in Apprenticeship Training

14 DIUS, March 2009, DIUS: Post-16 Education & Skills: Learner Participation, Outcomes and Level of Highest Qualification Held

Exhibit �� Impact of downturn on firms’apprenticeship programmes (%)

� ��

Terminate

Expand

Reduce

Maintain��

��

��

�


June 2009

© Copyright CBI 2009The content may not be copied, distributed, reported or dealt with in whole or in part without prior consent of the CBI. www.cbi.org.uk

For further information on this survey contact:

Mike NoakesHead of Employment, Employee Relations and Diversity

T: +44 (0)20 7395 8136E: [email protected]

CBIThe CBI helps create and sustain the conditions in

which businesses in the United Kingdom can compete and prosper for the benefit of all.

We are the premier lobbying organisation for UK business on national and international issues. We work with the

UK government, international legislators and policymakers to help UK businesses compete effectively.

Our members benefit from our influence, a wealth of expertise, business services and events.

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