Survey suggests fresh optimism in business confidence

There is a distinct air of optimism in the results of the latest Recruitment Confidence Index. Expectations regarding changes in business conditions, demand for products/ services and business confidence levels have all shown a turnaround from the depths seen in last quarter’s research.

The improved confidence in demand and in business conditions is such that according to the index much of the ground lost in the past 12 months has been recovered. But is this optimism based on realism or hopes of a new year far removed from the economic horrors of the foot and mouth crisis and the September 11th attack?

Responses from manufacturing also contain some surprises. In the last three to six months variations between the manufacturing and service sectors have converged in terms of measures of changes of business conditions and demand for products/ services. However, in the case of business confidence, manufacturing responses are now showing marginally more optimism than their service sector counterparts – 42% more manufacturing organisations are now optimistic about current business confidence than not, compared with 38% in the services sector.

The findings are contained in the latest Recruitment Confidence Index, a quarterly survey of UK directors’ and managers’ expectations of changes in recruitment activity and business conditions in the next six months. The RCI is produced by Cranfield School of Management and the Daily Telegraph in association with People Management.

Other key findings include:

Organisations in the manufacturing sector intend to increase their workforces, moving away from the expected decline of the previous survey whilst in the service sector expected increases are smaller.

There are overall expectations of higher employment levels in many functions compared with the previous quarter. Sales (up from 16% to 26%), customer services, marketing and production (from 5% to 15%) all made gains, implying that organisations are anticipating retaining or growing the number who make a direct contribution, rather than the indirect staff.

In all functions (except Computing/ IT) recruitment difficulties are expected to reduce in the next six months for managerial/professional staff.

Recruitment difficulties are expected to remain at their greatest in Computing/ IT, Engineering and Sales for managerial/ professional staff.

Despite the apparent optimism, the majority of respondents are not anticipating major pay increases. Expectations of paying more than 4% pa in the next 12 months have fallen from 17% in Autumn 2001 to 12% this quarter. The number of people expecting to pay increases of 2% or more has fallen from 81% to 75%.

Commenting on the figures, Professor Shaun Tyson of Cranfield School of Management said,

“Some of the positive messages we find in these figures may be attributable to ‘New Year optimism’. However, we must also bear in mind that the improvements seen here in business confidence are

compared to the Autumn 2001 figures which were collected around the time of the terrorist attack in the

USA. What we are seeing in early 2002 is a recovery in confidence and modest expectations of recruitment activity based on a belief that whilst unemployment may rise in the short term, by the end of 2002, the worst should be over.”

Nick Hill, Recruitment Sales Manager for the Daily Telegraph said, “We’re quietly encouraged by the optimistic expectations for the coming six months, particularly in the light of the severe economic difficulties experienced throughout 2001. The RCI research indicates that the manufacturing sector is about to turn a corner, but will this re-found confidence be borne out in overall increased business activity?”

Overall the RCI shows signs of optimism and positive expectations with more organisations anticipating growth in recruitment in the next six months than not. Although the index is marginally down from 112 for all staff in Autumn 2001, the downward trend that started in Winter 2000/01 seems to be flattening and in standing at 111, remains positive.

The current report is based on over 5050 responses from a representative sample of UK organisations with at least 25 employees. Respondents include HR directors and managers, finance directors, managing directors and recruitment specialists.