PerchPulse - UK Market Update August 2022

The latest and most relevant info on talent, immigration, business, and cost of living in the UK, to help HR people stay close to events and support their people strategy.

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A big feathery welcome!

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Hello and welcome to PerchPeek's UK August 2022 Market Update! 

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PerchPeek’s relocation specialists are here to offer insight into top mobility challenges and industry trends. We’re always keeping up with the latest international market trends that matter most to HR leaders, their teams, and their employees, helping them move and support their employees globally. Each month, we curate a monthly newsletter that includes our research and insights to better assist as many HR professionals as possible.

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Fly-by summary:

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• July results show the UK’s labour market is in a strong position as the number of full-time employees increased significantly over the last year. Many firms have increased wages and applied other bonuses to retain talent.

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• Skyrocketing fees in the UK housing sector are likely to further increase with recent inflation surges. Both rented apartments and home prices for first-time buyers have hit record highs, whilst the interest rate increases are expected to dampen demand for home purchases as mortgages surge. Annual costs for renters has increased 24% across the UK. 

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• Inflation in the UK has significantly increased the cost of living. The economy is dependent on the import of food and energy, making it prone to global shocks like the zero policy of China and the ongoing war in Ukraine.

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• The good news is the UK economy is resilient in the face of a pending recession. Businesses can access funding to keep their operations running, thus improving economic resilience.

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Talent & Migration

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Strong Labour Market Despite Recession Fears

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The UK’s unemployment rate is holding steady at 3.8%, 0.1% below previous forecasts. According to the Office of National Statistics, there was "an increase of 296,000 in the number of people in employment, the highest since August last year," indicating a rise in people who work full-time jobs or are self-employed. This reflects the shortage of workers being felt by companies, and the current “candidate-friendly” environment. In fact, many firms have resorted to providing bonuses to employees to recruit or keep personnel amidst the rising costs of living.

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Housing & Cost of Living

Rising Prices with Inflation

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Rent prices have increased by more than 20% across the United Kingdom, reaching record peaks. 

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In areas outside of London, the average rent is currently 11.8% higher than it was the previous year, while increasing by 15.8% in the city itself making it the  "greatest ever annual rate for any region." According to a recent survey, four out of five respondents are concerned about their future chances of obtaining a home.

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The graph below depicts England's lowest and highest repossession sales by volume.

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The forecast depicts a grim future for first-time buyers and Britons interested in climbing the home ladder. June saw a £1,354 increase in the overall average price of residences.

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The current quantity of available homes is simply insufficient to meet the strong demand. Interested first-time homebuyers will need approximately £2,560 more for a 10% deposit than they would have two years ago.

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Unavoidable Increase in Cost of Living

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The ongoing war in Ukraine and manufacturing shutdown in China triggered an imbalance between demand and supply. Given how import-dependent the UK is, supply-chain disruptions are directly impacting Britons with increasing food prices and energy bills. UK-based businesses dependent on energy and other imports are seeing drops in profit, ultimately impacting their consumers.

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On Friday 26th August, it was announced that the UK’s energy cap would be increased 80% by Ofgem, a massive hit to UK citizens. The government has announced funding towards supporting households, but there is still a lot of unease about keeping homes warm this winter. 

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Ways to Improve Your Workers' Welfare

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1. Be aware and empathetic towards employees, considering the rental and energy costs causing major hardships for many households.

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2. Offer work/life flexibility to enable employees who are currently searching the rental or housing market to move fast and secure a home that suits them; low supply means it’s extremely competitive.

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Business & Economy

Possible Prelude to Recession

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In theory, the United Kingdom is currently experiencing a recession. The Gross Domestic Product of the UK fell by 0.2% in the second quarter and experts predict the recession will likely continue until the first quarter of next year.

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A peak-to-trough decline in real GDP of 2.3% is expected as a result of the increasing cost of housing, shrinking cost of living support provided by the government (and higher energy bills), and rising interest rates (expected to reach 3% in 2023).

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According to a bleak forecast by the National Institute of Economic and Social Research,  on average, real incomes will drop by an unprecedented 2.5% this year and continue to remain 7% below their pre-Covid level through 2026.

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As a direct result, the most considerable portion of people’s income will be eaten up by rapidly increasing energy costs and loans. 

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According to the "Financial Stability Report" published in July 2022 by the Bank of England, UK banks are in a position to provide support to UK individuals and businesses despite the current economic uncertainty. Through its countercyclical capital buffer (CCyB), the United Kingdom's banking sector can mitigate potential losses and maintain lending to the country's households and businesses, even during economic downturns.

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Conclusion

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Unfortunately, the current outlook isn’t too pretty for the UK. Despite a rise in employment rates, there are challenging times ahead, with record cost of living expenses caused by supply constraints on energy and other commodities. Additionally, the housing and rental hikes are making it difficult for first-time buyers and relocators to purchase homes in the UK. As the economy shrank in the second quarter, there is a possibility of a recession by year's end, and UK banks are expected to be required to support businesses as the economic downturn continues.

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Thanks for reading! See you next month.

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Questions About Moving Employees or What We Do At PerchPeek?

No matter where your business is located, or how many employees you have to move, the relocation experts at PerchPeek are standing by at all times to answer any and all questions that you may have about moving and taking care of your most important business asset, your team! Feel free to reach out for a call with us or book a demo to see exactly how PerchPeek can work for you and your teams!

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