19th May 2023 – The number of UK sectors hiring new staff reached the highest level for six months in April, according to the Lloyds Bank UK Sector Tracker.

In April, ten out of the 14 UK sectors monitored by the Tracker increased headcount – four more than in March, and the highest level since October 2022.

The real estate sector hired at the fastest pace (59.1), followed by software and services (58.5), as greater availability of labour and stronger expectations of future output growth drove recruitment. A reading on the Tracker above 50.0 indicates expansion, while a reading below 50.0 indicates contraction.

In April, mentions of staff shortages by businesses surveyed by the Tracker fell to a 14-month low (2.78 times the long-run average).

Meanwhile, the Tracker’s measure of future output growth expectations over the 12 months across the economy rose to its highest level in 13 months (71.4), as businesses were less concerned about the effect inflationary pressures will have on output over the coming year (2.29 times the long-run average vs. 6.81 times in March). Automobile and auto part manufacturers reported the strongest output growth expectations (83.3), followed by software and services (82.5) and food and drink manufacturing (81.3).

However, reports of wage pressures increased further during April (3.02 times the long-run average vs. 2.22 times the month before) – a factor that could impact the trajectory of inflation.

In April, ten of the 14 sectors saw output expand, one more than in March.

Jeavon Lolay, Head of Economics and Market Insight at Lloyds Bank Corporate & Institutional Banking, said: “Our report suggests that hiring activity is firming again as, alongside a pick-up in activity levels and improving confidence, many businesses reported that it was easier to recruit staff.

“Nevertheless, while labour availability may have improved, competition for staff is still intense in some industries and rising wages were increasingly cited as a key reason for raising output prices in April.

“As this was particularly the case for firms in the service sector, where wages typically account for a larger share of costs, economists will continue to focus more closely on inflation trends here to assess whether the Bank of England will hike interest rates again next month.”

Scott Barton, Managing Director, Lloyds Bank Corporate & Institutional Banking, said: “It’s positive to see firms express more buoyant expectations of future output growth, while also having a slightly easier time accessing the skills and labour they need.

“This is an improvement, however, not a challenge ‘solved’, and the need to potentially pay more to access the labour businesses need to capitalise on growth opportunities will need to be carefully factored into firms’ growth plans and working capital requirements over the months ahead.”