The UK economy contracted by 0.2% in the third quarter of 2022, signalling the start of a recession that has been expected by many for some time.

But, with access to the right support, companies can get through this recession, and even grow despite it.

In this article, we look at the recent Autumn Statement and how the current recession will affect businesses. We also offer some insights into how businesses can mitigate the effects of the recession with a new approach to workforce planning.

Rising costs, rising inflation, rising everything

With inflation at nearly 10% at the time of writing, and set to remain at over 10% for most of 2023, business costs are rising quickly.

And while there have been several turnarounds from the government in recent months, one thing they are standing firm on is the planned increase in corporation tax which will take place in April 2023. This will bring the rates up from 19% to 25%.

In addition, the National Living Wage (NLW) will increase by 9.7% for individuals over the age of 23, putting an additional strain on payroll budgets.

Labour market responding with increased demand for contingent workers

Recent reports suggest that as of September 2022 there are over 1.6 million temporary workers in the UK. And according to latest research by the Association of Professional Staffing Companies (APSCo), UK businesses are becoming further dependent on contractors, with a 3% month on month increase in contractor roles. This is driving growing costs associated with employing contractors, who can stipulate higher rates thanks to reduced supply and increased demand.

A glimmer of light at the end of the tunnel might be the Apprenticeship Levy. But limitations on how the Levy can be funded means that nearly a quarter of the UK workforce are ineligible for it, while businesses are unable to draw down on a pot of funding for this critical resource.

In order to thrive in this period of economic instability however, businesses must have access to the flexible skilled resources they need to meet their growth targets.

Skills shortages continue to make headlines

All sectors are facing persistent skill shortages, which have been widely reported since 2020, but global big tech in particular is suffering from recruitment freezes. However, while there has been retrenchment in several high-profile companies (Meta and Twitter for example) we continue to see a widening gap between the demand from industry and the supply of highly capable tech talent. This is largely because almost every company now has a requirement for technology in some form (meaning that the “tech sector” arguably no longer exists as its own entity) with skilled tech workers moving between industries.

And according to recent figures by the Office of National Statistics, UK tech has added a further 92,000 jobs in the last quarter alone (to make a total of 350,000 jobs over the last 3 years).

Recent research has found that HR leaders feel that the UK skills gap is their biggest hiring obstacle, this means that employers will need to be creative in how they approach recruitment. And with tech investment in the UK set to hit the 3^rd highest in 15 years, as 56% of digital leaders plan to increase their headcount, competition for the top talent will be fierce.

“Businesses simply cannot afford to miss out on recruiting top talent, and they will struggle to do so if they compromise on key value propositions that will attract candidates,” says Becky Schnauffer, head of clients EMEA & LATAM at LinkedIn said in a recent interview. She went on to say that companies responding to the recession by scaling back on flexibility and professional development could “create a disconnect between what companies are offering, and what people want in a post-pandemic world.”

To be the kind of employer that can buck the trend of low talent supply means providing the right employment conditions that are demanded in a post pandemic world. Flexible working, competitive rewards packages, ongoing training, and a straightforward onboarding process are all factors which are considered by potential candidates. But they can prove to be a sticking point for employers who maybe don’t have the resources to compete for the top talent.

“The Next Silicon Valley” – Chancellor

As part of his Autumn Statement, the Chancellor expressed his vision for making Britain “the world’s next Silicon Valley,” by combining resources in technology, science, and finance. He pointed out that “21st century economies will be defined by new developments in artificial intelligence, quantum technologies and robotics.”

And while this is a worthy goal, most companies will respond to this idea as merely a pipe dream in the wake of the global skills shortage and a lack of government investment.

This means that we must focus on the development of skills to ensure that labour supply can meet future demand.

And Peter Cheese, Chief Exec of the professional body for HR and Management, CIPD, agrees. “There needs to be an economy-wide, joined-up strategy to encourage and enable more firms to adopt strategies where the workforce is recognised as something to be invested in and drives value, rather than a cost to be minimised,” he said.

Seizing the opportunities offered by recession

We are facing an economic downturn, but history teaches us that while recession can be a dangerous time for business, it is also a time of abundant opportunities to grow, as long as we adapt with flexibility.

And with experts suggesting that this will be a short, sharp situation, which should be over by the end of 2024, being able to adapt is crucial. Having access to flexible resources gives companies the ability to make dynamic decisions and jump on available opportunities.

“…opportunities remain and organisations, while preparing for headwinds in the near-term, do need to keep one eye on ensuring they are ready to thrive in the upturn that will inevitably follow,” says Resource Solutions CEO Norma Gilllespie.

We are facing a difficult economic climate, and businesses need access to a pool of strong, highly skilled, and flexible people resources to help weather these conditions and minimise disruption.

Workforce Consultancy can attract, source, train and upskill people resources for you, ready for deployment. We focus on graduate and graduate calibre individuals, with an emphasis on early years and reskilling training for career changes. This allows us to build the future talent that you need to ensure that your work force is agile and adaptable, without the additional costs usually associated with working with contractors.

In fact, with 30% of contingent workers reported to be within project and programme delivery, working with us means a saving of between 10-20% on your contingent labour spend for project managers, business analysts, change and transformation managers. This translates to £1 million for every forty Workforce Consultants deployed.

As your flexible resources partner, Workforce Consultancy offers a try before you buy option, giving you an interim solution to accessing permanent people resources, and relieving the financial considerations that might usually mean restrictions on recruiting during a recession. Our unique model ensures that investment into early careers and future talent continues, by removing the risk to clients of recruiting permanent employees and funding training, and supplying talent on a day rate, as needed, basis.

“We're looking at how we can support businesses across all our services, whether that's through insights, data or advisory. Businesses can’t afford to stick their heads in the sand and not invest in their future talent; because when the recession lifts, they won't be ready to scale up for growth,” says Global Head of Workforce Consultancy, Jessica Holt. “Some organisations have the investment to support apprenticeship programmes directly and they're utilising their permanent headcount spend, others have funding within a contingent or purchase order space that they can use. So, they can pause their permanent headcount recruitment during recession and use their flexible non-permanent spend to create a future talent pipeline. Having several options to access that early careers talent ensures growth and sustainability.”

Talk to us today about how we can help you mitigate the effects of the recession with an agile and highly skilled workforce solution, which can help you grow during difficult times.