It’s been three hot and barmy months since I last put finger to keyboard, and I have to say: what a summer! As well as record temperatures, we’ve had nerve agents in Salisbury, the resignation of Boris Johnson, and a football world cup – and that’s without even mentioning Donald Trump.
Equally, we’ve also seen various economic developments that have impacted the executive recruitment market – and therefore deserve a brief mention:
Talking the big picture – assessing the economic landscape
Unemployment: which continues to fall, reaching 4% in June the lowest level since the December 74’ – February 75’ period. Figures also showed that unemployment declined by 65,000 in the first quarter of the year, while employment rose 42,000. Putting these numbers in perspective, the unemployment level in Germany stands at 3.4%, in Spain 15.2%, with the average across the EU being 6.1%.
Inflation: the UK’s annual inflation rate went up slightly by 0.1% to 2.5% in July, as per market forecasts. The major culprits (in terms of rising costs) being transport, housing, utilities, and food – which has not been helped by the heat and drought of the summer months that threaten to add a further 5% to our supermarket bills.
Interest rates: at the beginning of August the Bank of England raised the interest rate a quarter percentage point to 0.75% – only the second increase in a decade. But again, this is still a very low number even if Mark Carney, the Bank’s governor, hinted at further “gradual” and “limited” rate rises to come.
Economic growth: the UK economy grew at a faster rate than forecast in the first 3 months of 2018, leading the Office of National Statistics to revise its growth estimate up 0.1% to 0.2%. GDP also expanded 1.3% year-on-year in the second quarter, while the pound continues to perform well and is forecast to reach $1.41 by year-end.
Talking recent developments
While the majority of my clients report confidence levels as high, there are of course sectors that continue to struggle – the most obvious example being retail.
I’ve previously explored the challenges faced by the high street, and we need to look no further than House of Fraser to know nothing’s changed. As I type, the department store chain still faces an uncertain future – as do its 59 stores and 17,500 employees – following its acquisition by Sports Direct for £90 million.
Unfortunately they’re not the only ‘traditional retailer’ to be under pressure – think Homebase being sold for a pound and Marks & Spencer closing more stores. Indeed, it’s estimated that high street closure rates are now happening faster than at any point during the recession, with some 50,000 stores now deemed surplus to requirements.
As for causes, the clients I’ve discussed this with mention the obvious impact of the Internet (a fifth of all retail spending now happens online), as well as rising costs: while transforming their digital capabilities traditional retailers are also having to negotiate a weak pound and higher business rates etc. – alongside the continued problem of oversupply in the market.
But what does this tell us?
Well to again quote my clients, the situation highlights once more the importance of ‘best practice’. Those doing well in this new reality (Amazon, Subway etc.) are able to master the basics: to supercharge the ‘customer experience’, making it slick, interactive, and highly relevant to their customers’ lives. House of Fraser can blame ‘greedy landlords’, but maybe the real reason for their demise has been a stale and out-dated business model (it’s interesting to note that while House of Fraser invested £25 million in its digital strategy, John Lewis was spending £500 million!).
Talking Brexit (again!)
In other news, Panasonic has recently announced plans to move its European HQ from the UK to Amsterdam, while the BBC continues to report that a ‘number of multinational firms’ expect to move jobs out of the UK. Is this further evidence of the coming Brexit apocalypse? Maybe, but I’m not convinced.
I say this because of my continued surprise at the relaxed attitudes displayed by most of my clients toward the subject. This is due in part I believe to the historically low unemployment rate, which can be viewed as evidence of the UK’s strength ahead of Brexit. However that’s not to say that every CEO and CFO I talk to is apathetical on the nation’s exit plans, and many harbour growing concerns – particularly those involved with moving goods across European borders.
What’s going to happen on this latter point seems especially difficult to predict in terms of any final arrangement (and what new checks/tariffs/costs will be introduced) – which is why the likes of Aston Martin have announced that the group is stockpiling its German-made engines “in case of possible border delays”. Hence the consensus from my clients that a deal is needed ASAP – if for nothing more than to introduce that most prized of qualities: certainty.
But for now it could be argued that the ‘Brexit paradox’ appears more of a political issue than an economic one. If so, does it present a similar situation to the Y2K frenzy? Will planes fall from the skies next March when we exit the EU? Will only a number of minor ‘tweaks’ be needed to maintain business as usual? Or is there long-term trouble laying in wait, with many companies at risk of being caught asleep at the wheel?
The one thing we can be sure of is that we’re going to find out soon enough!
Talking about the job market
Overall, I would still describe conditions as buoyant. From a candidate’s perspective the fact that employment remains high – helped by EU migration levels hitting their lowest levels in four years. I use the word ‘helped’ cautiously however, as with such a drop comes the fear of a pending ‘skills shortage’.
Looking to my clients, tech, healthcare, and pharma continue to be areas of high activity. Understanding why this is the case is never easy, but maybe the answer can be found in the wider trends driving demand:
- For tech, both businesses and consumers show no sign of losing their fascination with all things digital – and its ability to make our lives smarter, more convenient, and interconnected.
- For healthcare and pharma, business is boosted by an ageing population in the West, and a blossoming middle class in countries such as India and China who now demand access to private care and the latest cosmetic treatments
As for the rest, the conversations I’m having point to a continuing sense of optimism. Many clients are sitting on large cash reserves, but do so less out of a fear of what Brexit will bring and more as a foundation for ‘acting on opportunity’ – particularly through acquisition.
It’s also interesting to see the number of firms coming to Eton Bridge Partners with roles based on the continent (or even further afield). We’ve worked hard to demonstrate our international capabilities over the past few years, and (I’d like to think) due to our success we’re now handling a record number of global searches – across sectors ranging from automotive distribution to property.
Buoyant, positive, optimistic: three words that I would argue currently define UK Plc. No hiring freezes, no rush for contingency planning in the final build up to Brexit, and a Bank of England confident enough to raise interest rates. All set against a backdrop of tremendous uncertainty that ultimately adds a degree of ‘high strangeness’ to the situation.
What’s more, as an executive search and interim management firm, Eton Bridge Partners is well placed to notice any tightening in the economy – but to date we haven’t. If this does happen in the next quarter, usually one of our busiest in the year, then possibly this will be a cause for anxiety. But until that happens, hope springs eternal.
Until next time,
Partner – Head of CFO & Finance Practice
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