Related posts:No related photos. Fearsof a recession and its effect on staffing levels mean HR professionals may needto re-examine their retention policies. Karen Higginbottom reportsOn22 March, more than £52bn was wiped off share prices on the FTSE-100 index. Itis being called Black Thursday. Correspondingdrops on Wall Street, coupled with the announcement of major job losses bylarge firms, have contributed to gloomy economic forecasts. Theshare collapse was triggered by the news that US giant Procter & Gamble iscutting 9,000 posts. It employs 6,000 staff in the UK. Thelist of companies making redundancies is growing. One of the UK’s biggestengineering group Invensys announced it is shedding 2,000 more workers on topof the previously announced 3,000 redundancies.Furthermore,US telecoms giant Motorola and Walt Disney are is cutting 4,000 jobs each.Employersare getting agitated over whether it signals the onset of a recession, and HRprofessionals are wondering whether they should be drawing up contingencyplans.JohnPhilpott, chief economist at the CIPD, explains that the likely effects arethat UK economic growth will slow but that worries about a recession areunfounded.Hesaid, “There will be no major impact on the UK economy but there will be aknock-on effect on the new economy areas such as the dotcom sectors.”Philpottexpects the labour market to remain tight for the foreseeable future. He said,“There is likely to be levelling-off of the employment market, with falls inunemployment and the rises in job vacancies grinding to a halt.”Theeffects of a levelling-off of the employment market means that HR professionalswill have to re-examine their retention policies, warned Philpott.Hesaid, “Employers will have to make sure that they retain the best staff asthere will be an ongoing turnover of labour. The war for talent will intensifyas competition increases for better workers in certain sectors.”Oneeffect of a tighter labour market will be the need for more sophisticatedreward packages in place in order to retain the more skilled employees.Employerswill have to think about putting benefit packages in place that areindividually tailored to the employee, such as providing sports facilities andoffering flexible working practices, explained Philpott.Heis not buying into the belief that a “sneeze” in the US necessarily results ina “cold” in Europe.“Mymessage to HR is not to panic. At the very worst the jobs market will stabilisewith a remote prospect of rising unemployment,” advised Philpott.Butmany companies are getting worried. Software company ICL believes that arecession is in the offing in the UK. Acompany spokesman said, “Employers may have to cut back on recruitment to avoidredundancies. Although there is a time lag from the US to Europe, the recessionis looming. The markets are overheated with dotcoms.” IanBrinkley, senior economist for the TUC, disagrees. He believes that the USstock market crash will have a limited impact. He is convinced that the labourmarket will continue to be tight in the UK with recruitment and retention atthe forefront of employers’ agendas.Hesaid, “The old ‘hire and fire’ economy has gone. Employers are looking outsidetraditional areas of recruitment, such as the service-sector firms based in London,and going to the Home Counties to seek out labour.”Anothersymptom of the tight labour market is increased investment in employees,according to Brinkley. He said, “Employers are now investing more money intheir employees, especially in the IT, business and public sectors.” Hepoints outs that there is an economic pressure on employers to offer flexibleworking practices to staff as more women with children are entering the labourmarket. BruceWarman, Vauxhall’s HR director, thinks the jury is still out on whether therewill be an economic downturn in the UK.Hesaid, “Let’s not get carried away with the market volatility in the US. It’sjust a correction of high-tech stock prices.”Warman’sadvice to HR directors is not to get carried away with the talk of a recession inthe UK. He thinks the news of an impending recession is premature consideringthat the stock market started to recover after Black Thursday.Hesaid, “My message is to be cautious and don’t do anything rash. Balance yourshort-term decisions with your company’s long-term strategy.”Manufacturers’confidence underminedTotaldemand for manufactured goods fell again and output expectations for the comingfour months have weakened for the second consecutive month, according to theCBI’s March survey of industrial trends. Fifteenper cent of manufacturers said total order books were above normal but 38 percent said they were below. The balance of -23 per cent compares with -16 inFebruary and is the most negative figure reported since July 1999.Exportorder books are still well below normal. The balance figure of -24 is the same as that reported in theFebruary survey. Fallingtotal demand is reflected in output expectations. Over the next four monthsoutput is expected to be little changed. While 26 per cent of people saidvolume of output will increase, 23 per cent said it will fall giving a balanceof +3, the weakest figure since November 2000.Stocksof finished goods have stayed broadly stable over the past month. The balanceof +20 per cent of firms reporting more than adequate costs compares with +19last month, but they stay at their highest level since March 1999 and above thelong-term average.CBIchief economist Kate Barker said, “This survey is further evidence that thetroubles of the UK’s manufacturing sector are far from over. The US slowdownmay have a more serious impact on the UK than first predicted. Higher stocklevels and falling demand are already causing companies to rein back theiroutput plans.” Talent needed to ride stormOn 3 Apr 2001 in Personnel Today Previous Article Next Article Comments are closed.