Rising costs, unreliable data, and economic uncertainty are driving employers to rethink how they manage and optimise their workforce strategies. This month’s insights explore critical data gaps, shifting business confidence, and how workforce management can help employers navigate these pressures effectively.
Gaps in UK Labour Market Data
Reliable labour market data has long been essential to economic and workforce planning. However, persistent challenges with the Labour Force Survey (LFS) and delays to the Office for National Statistics (ONS) Labour Market Survey until 2027 are leaving employers in uncharted territory.
Key Challenges
- Falling response rates: LFS participation hit an all-time low of 17.4% in 2023, recovering to 24.6% in 2024, bolstered by financial incentives ranging from £10 to £50.
- Eroding trust: Declining confidence in government and privacy concerns have made respondents increasingly cautious, compounded by logistical and resourcing challenges for interviewers.
- Outdated methods: The five-wave survey process, requiring 45-minute interviews over several months, is a time-intensive approach that struggles to meet modern needs.
What It Means for Employers
With traditional data sources no longer providing a clear picture of the labour market, employers must shift towards alternative approaches:
- Leverage alternative data: Internal workforce analytics and platforms like Indeed Flex offer dynamic insights that traditional surveys cannot. These tools provide a window into real-time worker preferences, pricing trends, and sector-specific demand patterns.
- Understand worker behaviour: Insights into shift preferences, roles, and locations help employers align their workforce strategies with worker needs.
- Optimise costs: Accessing current market rates ensures businesses can maintain competitive pay while managing labour spend effectively.
- Anticipate demand: Monitoring real-time data across industries enables proactive staffing decisions to meet changing business requirements.
- Build flexibility: Employers must embrace agility in their workforce models, focusing on adaptability rather than relying solely on static, historical data.
Business Confidence Declines
The British Chambers of Commerce (BCC) has highlighted a drop in business confidence, with rising operational costs and economic stagnation weighing heavily on employers.
Key Findings
- Price pressures: 55% of businesses plan to raise prices in Q1 2025, up from 39% in Q4 2024, citing fuel and labour costs as primary drivers.
- Labour costs dominate: A significant 75% of businesses identify rising labour costs as their biggest challenge, particularly in hospitality, transport, and logistics.
- Cautious investment: Nearly 25% of businesses have scaled back investment plans, though 56% report no change. Many are channelling resources into retention, training, and upskilling.
What It Means for Employers
- Streamline workforce costs: Employers must focus on operational efficiencies, from vendor management to workforce allocation, to offset rising costs.
- Invest in retention: Businesses should prioritise creating a culture that values and supports employees.
- Prepare for change: As labour market conditions evolve, businesses that focus on upskilling and adaptability will be best placed to succeed.
Economic Outlook: Inflation and Stagnation
The economic recovery that began in early 2024 has stalled, with inflationary pressures and stagnant growth creating an uncertain outlook for 2025.
Key Trends
- Inflationary pressures: Inflation rose to 2.6% in January, driven by higher wages and energy costs.
- Stagnant growth: Despite a strong start in 2024, GDP flatlined in the final quarter, and short-term sentiment suggests continued softness in early 2025.
- Sector-specific struggles: Retail and hospitality face the lowest confidence levels, while logistics continues to bear the brunt of rising costs.
What It Means for Employers
- Focus on efficiency: Identify areas where technology and streamlined processes can offset rising costs.
- Scenario planning: Build flexibility into workforce strategies to prepare for economic uncertainty, from fluctuating demand to shifting wage pressures.
- Leverage technology: Digital tools like data analytics can improve decision-making and prioritise key areas for investment.
A Strategic Approach to Workforce Management
The challenges employers face today require more than reactive solutions. A strategic approach, built on the foundation of data and technology, can provide the clarity and control businesses need to thrive in uncertain times.
- Centralised visibility: Tools like Flex Plus enable businesses to consolidate data from multiple agencies, providing an overarching view of labour spend, supplier performance, and compliance.
- Enhanced agility: Businesses can scale their workforce dynamically to match demand, ensuring they remain flexible and cost-effective.
- Smarter decision-making: Real-time insights into worker preferences, market pricing, and sector trends allow for proactive planning and better workforce alignment.
- Cost control and compliance: By automating processes such as invoicing and benchmarking supplier costs, businesses can mitigate risks and maintain financial stability.
Closing Thoughts
As employers grapple with rising costs, unreliable data, and economic uncertainty, the need for strategic workforce management has never been greater. By leveraging real-time insights and investing in tools like Flex Plus, businesses can position themselves to navigate these challenges effectively.
While uncertainty may define the labour market in 2025, employers who prioritise adaptability and innovation will be well-equipped to maintain their competitive edge.
