U.K. Labor Market Could Feel the Strain in 2017, CIPD Says

  • HR body said Brexit and low productivity will hit real wages
  • Government should clarify status of EU workers in the U.K.

What Brexit Means for U.K. Labor Market and the Pound

The outlook for Britain’s labor market is “fairly bleak” amid the uncertainty surrounding Brexit and low levels of productivity, according to the Chartered Institute of Personnel and Development.

Slower growth, lower real wages and increasing precariousness in the workforce will be the major challenges for the U.K. government and businesses over the next 12 months, the CIPD said on Friday. Companies could also be faced with a shortage of workers from the European Union and British lawmakers should clarify the status of EU citizens in the country, the body said.

“We simply cannot afford for businesses to live in limbo,” said acting chief economist Ian Brinkley. “Very few employers want a hard Brexit and the government must consider this when planning its strategy for both the final arrangement and the transition towards it.”

For a Quicktake Q&A on what makes a ‘hard’ Brexit, click here

With the government preparing to begin formal negotiations to leave the EU next year, the Bank of England has said growth will likely slow, while the weak pound is set to boost inflation above its 2 percent target. But with employers reluctant to invest and productivity levels languishing, wages will be hard-pushed to keep pace with prices, with the CIPD predicting median basic pay settlements of 1.1 percent in 2017.

“Until we crack the U.K.’s productivity problem, and find ways to sustain productivity growth, it’s unlikely that we will see any improvement to living standards for some time,” Brinkley said.