The strength of the UK’s jobs market is not as simple as it seems | Larry Elliott | Business

There is a straightforward explanation for the continued strength of the UK jobs market. Firms are reluctant to invest because acute Brexit uncertainty means it is nigh on impossible to forecast future demand. Rather than be left with a bit of unwanted and expensive kit on their hands, businesses have taken on more workers instead.

That all seems to make perfect sense. Britain has a reputation for having a flexible labour market, so companies can easily take on staff to meet temporary surges in demand knowing that they can get shot of them later.

The only problem is that the theory doesn’t really square with the facts. If firms were really taking on more staff as a result of Brexit jitters, there would be an increase in part-time work and self-employment.

But the latest data from the Office for National Statistics shows that in the year to February, there was a 473,000 increase in the number of people working full-time and a 15,000 drop in the number working part-time. There was a 100,000 increase in the number of full-time, self-employed workers but a drop of 24,000 in part-time, self-employed staff.

Nor is there much evidence of a big switch to the hiring of temporary workers in the three months to February – a period when Brexit uncertainty was ratcheting up. The 179,000 increase in employment was split 138,000 full-time and 41,000 part-time. Self-employment was down by 23,000.

As the employment expert John Philpott has noted, the tendency for the UK economy to become more labour intensive predates Brexit and helps explain the UK’s dismal productivity record since the financial crisis. Indeed, Theresa May is not the first prime minister to be faced with the challenge of overcoming the aversion of British companies to invest. Harold Wilson and Ted Heath both grappled with exactly the same problem in the 1960s and 70s.

For decades, the critique has remained the same: a big productivity gap with rival countries is the result of low pay, inadequate training, clapped out machinery and an endemic short-termism. High levels of employment are the flipside of that.

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