On Thursday 3rd February 2022, the Bank of England increased its base rate from 0.25 per cent to 0.50 per cent. The Bank of England hasn’t increased its rates since July 2007. While numerous companies knew about the interest rate rise, it’ll affect everyday functions, not to mention the recruitment industry.
With a lot of UK households feeling squeezed by higher costs for petrol, food, rent, cars, and so on, the Bank of England decided to rein in inflation by raising interest rates to slow down spending and borrowing.
So, what does a 0.25 per cent surge mean for the recruitment industry, though? First, let’s look in more detail at the increased rates and what they mean.
What’s the Bank of England’s base rate?
Currently, the base rate of interest sits at 0.50 per cent, following the Bank of England’s vote to up it back in February 2021.
The rate used to sit at a record low of 0.10 per cent between March 2020 and December 2021 after two drops at the beginning of Covid-19.
The base rate sets the level of interest that commercial banks charge you on financial products such as mortgages. So, the rate’s vital.
Will interest rates go up again?
If you’re wondering when the next interest rates rise decision will happen, you can expect this on 17th March 2022. The Monetary Policy Committee (MPCs) will meet to discuss the interest rates again.
What does the base rate mean for the recruitment industry?
Increasing prices have impacted living costs, company expenditure, borrowing, and other parts of the financial market.
Increased inflation escalates inflation expectations, meaning bosses are forced to boost salaries so that their staff members demand a raise to offset their shortfall of buying power.
Managers offer their workforce higher pay and increase prices, driving inflation up as employment costs increase.
The bottom-line of rising interest rates is that, essentially, companies will feel more under pressure. It’ll cost more to borrow money. Thus, business loans will be higher. What’s more, companies may feel under more salary pressure – the reason for increasing the interest rate is to decelerate inflation which, in turn, should boost salaries.
With this in mind, the recruitment industry may be hit marginally, as businesses are more cautious about hiring new candidates – particularly if they’re anxious that production is down.
That said, numerous businesses predicted the increase a while ago. So, the companies that foresaw the rise probably budgeted, or adjusted their company strategies, appropriately.
The reduced staff has forced companies to offer their workforce better pay to entice and keep them.
Employers are looking for more tactical ways to hire and hold staff through salary raises and more appealing job perks. Job candidates are seeking higher salaries to keep up with higher prices.
The bottom line
Bosses amend the pay they offer their workforce gradually to make sure all their staff can benefit from a similar living style as they did before inflation climbed.
Employers that don’t may find it tricky to find quality candidates and end up recruiting less experienced talent.
While inflation doesn’t have a dramatic effect on the recruitment industry these days, it does affect an employer’s ability to hire quality candidates.
Don’t get too anxious, though, as the Bank of England can push the interest rate button at any time if it detects the inflation’s getting out of control.
A final note
We think 2022 is going to be a smoother year in the War for Talent, but at the same time, it’ll probably continue to be an erratic year that’ll likely force hiring to carry on evolving. We advise equipping yourself with the right pieces of information to help your candidates steer their way through the still-turbulent waters.