LONDON (Reuters) - British businesses are reluctant to ramp up hiring quickly even as their confidence levels hit record highs, a survey showed on Monday, bolstering the Bank of England’s argument that unemployment is likely to fall only slowly.
The survey by the Chartered Institute of Personnel and Development (CIPD) comes ahead of the publication of new BoE forecasts on Wednesday, in which the Bank is widely expected to bring forward the time-frame of its forecast for unemployment to fall to 7 percent.
The Bank says it will not think about raising rock-bottom interest rates until unemployment falls to that level, something it said in August would only happen in late 2016.
Employer confidence in the three months to October hit its highest level in the survey’s eight-year history, but the study also cautioned that the growing optimism may not translate into significant employment gains.
Only 17 percent of the 1,020 firms surveyed said they would increase staff by more than 2 percent if Britain’s economy returned to growth of 2 percent or more.
Forty-two percent said they would likely keep staffing at current levels in such a scenario, almost a quarter of whom expected to be able to increase the productivity of their existing staff.
That echoes the Bank of England’s central view that firms will respond to growth by squeezing more from workers already on their books, meaning unemployment will fall only slowly.
“Our data on medium-term recruitment intentions suggest that stronger economic growth in the next few years will not be accompanied by big rises in employment,” said Gerwyn Davies, Labour Market Adviser at CIPD.
A separate survey by the Confederation of British Industry (CBI) of 338 firms showed that smaller manufacturers’ optimism about their business situation rose at the fastest pace in the survey’s 25-year history.
Reporting By Shadi Bushra; Editing by Hugh Lawson