MNI INTERVIEW: BOE Consultant: Data Show Brexit Hits Hiring

--BOE Decision Maker Panel Data: Brexit Curbing Employment Growth

By David Robinson

     LONDON (MNI) - The Brexit process is curbing the ability of firms to hire

without driving wages up, a Bank of England advisor told Market News in an

exclusive interview.

     Paul Mizen, who co-ordinates the central bank's Decision Maker Panel (DMP)

business survey with Stamford's Nick Bloom, told MNI that firms' atrophying

hiring seems to be linked to growing labour shortages. BOE agents, along with

private sector surveys, have all highlighted the difficulties firms are

experiencing recruiting, while wage growth so far remains subdued.

     "If anything the (Brexit) effects are being felt in hiring rather than in

wage negotiations," Mizen said.

     The BOE agents fourth quarter report said that labour shortages had become

more widespread across sectors and skill levels. The fourth quarter DMP survey,

however, found that respondents expected wages to rise by just 2.5% in the next

twelve months, barely changed from the 2.6% reported for the past 12 months.

     "It may well be that the firms that are expecting to hire less are simply

acknowledging that the supply of skilled labour is not going to be as plentiful

as it was before Brexit," Mizen said.

--EMPLOYMENT NET NEGATIVE

     The DMP survey, which covers an extensive and rapidly expanding base of

company executives, found in its fourth quarter results that some 10% of firms

said that they would add additional labour as a result of Brexit while 31% of

firms said that it would subtract from employment, a clear net negative effect.

     The most recent National Statistics data showed UK employment declined,

with a 56,000 fall in the number employed in August through October from the

previous quarter, the first fall in the non-overlapping three monthly employment

level in exactly a year.

     Labour shortages will have direct and indirect effects on [firms], Mizen

said. The direct effect, which is already evident, is that firms are struggling

to hire skilled labour and they may also be running into difficulties hiring

unskilled labour.

--STUDENT SLOWDOWN

     "I think there is also an indirect effect which operates through the effect

of Brexit on the university sector. I think we are seeing a reduction in student

applications from the EU as the result of Brexit ... and that is going to affect

the future labour supply and the quality of skilled labour," Mizen said.

     Prime Minister Theresa May has refused to back down on her insistence that

students are included in net migration figures and universities have reported

declining student applications from the EU. Data published in November by the

university admissions service Ucas showed a 4.4% fall in EU applications on a

year earlier, the first such fall since 2012.

     A decline in applications from qualified overseas students, in sciences and

other areas, cannot be readily replaced within the domestic education system.

     "You will just see fewer qualified people coming from the EU and therefore

firms will be affected by that. How is it going to affect the firms ? Well, I

think it is going to dent their productivity. With less skilled labour available

they are going to end up being less productive," Mizen said.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

[TOPICS: M$B$$$,M$E$$$,MX$$$$,M$$BE$]