The East Midlands’ unemployment rate has fallen to its lowest point on record, new figures show. It was 3.5% for the period between September and November last year, compared to a 4.1% national average. This is the lowest level since the Office for National Statistics (ONS) began publishing regional labour market figures in April 2015, and represented the smallest proportion of the workforce being unemployed since the three months to December 2019, when the rate was 3.6%. It also marked a significant drop on the previous reporting period for August to October 2021, when the region’s unemployment rate was on par with the UK average at 4.2%. East Midlands Chamber Chief Executive, Scott Knowles, said: “This is fantastic news for the region’s labour market and sends a clear signal that the East Midlands is open for business. “It reflects our own research that indicates our region’s firms are creating jobs to meet strong demand following the effects of the pandemic. The Chamber’s latest Quarterly Economic Survey (QES) for Q4 2021 showed two-thirds of companies attempted to recruit, while a net 35% expect to increase their headcount in the first three months of 2022. “We are represented by a very diverse economy in the East Midlands but there have been some standout sectors to celebrate in recent times, such as the logistics industry that has been a major driver of job creation during the pandemic, which has accelerated pre-existing online shopping trends.” Tightening labour pool presents acute challenge for businesses While the East Midlands has one of the lowest unemployment rates for over-16s in the UK, the economic inactivity rate for people aged 16 to 64 rose from 21.02% to 22% in the most recent reporting period. UK job vacancies also soared to a record high of 1.24 million between October and December – 462,000 higher compared with the three months before the pandemic. Scott added: “Despite the positive trajectory in unemployment, businesses are still encountering major recruitment challenges in a super competitive jobs market. “The 0.8% increase in the economic inactivity rate represents a rise in the number of people who have opted out of employment, whether it’s for studying, caring or to take early retirement – with the latter being a noticeable trend during the pandemic. “This means the labour pool is tightening at a time when companies are desperately trying to fill roles to cope with demand, which will enable them to continue growing and creating more jobs for local people. “Many companies in traditional industries such as manufacturing and construction often tell us about the difficulties in replacing an ageing workforce with younger talent, and the latest QES showed that eight in 10 of those that attempted recruitment struggled to find people with the right skills. “As we await publication of the Government’s delayed Levelling Up White Paper, the wider context behind the latest ONS data illustrates the need for policymakers to understand how we can pull the right levers in order to support the local economy’s requirements.”

Omicron stalled the growth of consumer-facing businesses in December, as manufacturers benefited from easing supply chain pressure, according to the Lloyds Bank UK Recovery Tracker. Despite headwinds that resulted in an overall slowing of the pace of the UK’s economic recovery, the total number of UK sectors monitored by the Tracker reporting output growth held steady month-on-month – with growth in 10 sectors in both December and November. Activity in the tourism and recreation sector – which includes pubs, hotels, restaurants and leisure facilities – contracted for the first time in nine months in December (43.2) as concern over the Omicron virus variant impacted consumer behaviour. A reading above 50 signals output is rising, while a reading below 50 indicates contraction. UK transportation – which includes airlines, hauliers and rail operators – experienced its first loss in momentum for four months, recording its weakest output growth since August 2021 (54.3). In contrast, three of the manufacturing sectors monitored by the Tracker registered a stronger month-on-month performance in December, supported by strong demand and easing supply chain pressures. This included manufacturers of household products, which saw output growth accelerate to the fastest rate since June 2021 (56.7 in December versus 52.2 in November), manufacturers of technology equipment (60.1 vs. 53.1) and industrial goods (52.2 vs. 50.0). Business capacity issues remain, with staffing a major concern The number of firms reporting an inability to meet demand due to staff or material shortages continued to ease from its peak in September 2021. However, the level  remained elevated relative to the long-term average. In December, the number of firms reporting rising backlogs due to staff or material shortages, was around five times the long term average, compared with September when it was over six times the long term average. According to the Tracker, UK companies were more likely to report capacity challenges stemming from staff shortages than counterparts in the Eurozone. The potential for the availability of qualified candidates to remain tight, and competition for talent to translate into further wage pressures could lead to high inflation in 2022 lasting for longer in the UK than in the Eurozone, even if supply chain pressures continue to ease. All of the fourteen UK sectors monitored by the Tracker reported rising input costs in December, with wages remaining a key driver of costs – particularly for service sector businesses. Overall, UK firms were 4.3 times more likely than the long-run average to report an increase in their wage bills as businesses sought to attract and retain skilled talent, up from 3.8 times in November. At the global level, the UK remained one of the countries with the largest gap between the Tracker’s input and prices indices – signalling more acute pressure on firms’ margins. In December, the gap between the UK indices registered 15.2 index points, the joint-second highest with Italy, as Spain registered 17.2, which is well above the global benchmark of 9.5. This could fuel inflationary risks if businesses look to alleviate margin pressures through future prices rises. Jeavon Lolay, head of economics and market insight at Lloyds Bank Commercial Banking, said: “While consumer-facing businesses, like those in travel and hospitality, unsurprisingly bore the brunt of consumer concern over the Omicron variant in December, the resilience shown in other service sectors and manufacturing helped soften the impact on the economy as a whole. “Further signs of optimism were evident in data showing supply chains slowly recovering and staff numbers rising in all sectors with the exception of tourism and recreation. “However, the cost backdrop remained acute as higher energy prices and wage bills pushed up firms’ expenses. It’s no surprise that an increasing number of firms plan to raise their prices in the year ahead, indicating rising and potentially sustained domestic inflationary pressure.”

New research from Grant Thornton UK LLP’s latest Business Outlook Tracker has revealed that, prior to the implementation of ‘Plan B’ and the return of work from home guidance, hybrid working was being adopted by many mid-market firms in the East Midlands, but some businesses were still facing challenges with its implementation. The survey of mid-sized businesses found that a hybrid working approach, where people split their time between working remotely and in an office, was the most common working practice in early December with 92% of the region’s businesses working this way. Despite more than nine out of ten businesses operating in this manner, 15% said that they were not yet finding it to be effective. The research identified that the main working style challenges for those respondents adopting a hybrid working approach are:

• Managing the work of more junior staff (46%)
• Loss of culture (46%)
• Mental wellbeing (37%)
• The provision of training remotely (37%)
• Having efficient technology (37%)

Hybrid and remote working, as well as the issues it can create, are likely to remain the norm for many businesses even after Boris Johnson scrapped the government’s work from home guidance earlier this week. Sue Knight, partner and practice leader at Grant Thornton UK LLP in the Midlands, said: “Since the pandemic started, many of us have seen a significant shift in our working patterns, with remote and hybrid working becoming the de facto norm. This has been especially evident in the East Midlands, with more than 90% of the region’s businesses adopting this approach. “There have been a lot of benefits that have come with this change for both companies and their employees, such as saving costs on reduced office space and achieving a better work-life balance. However, this transition has not been easy and there have been a number of challenges to overcome – challenges that many are still trying to find the answer to. “Making hybrid working effective takes time and commitment and right now every business is on the same learning curve, trying to find out how to make their people continue to feel connected and supported, wherever they are working. As we move into the New Year, businesses need to stay agile and open to evolving in order to ensure that hybrid working operates as effectively as possible for them, which could take the form of investing in new technology or finding new ways to train, organise and co-ordinate teams.”