HR Trends17 March 2023

Economic and Talent Forecast 2023

ChapmanCG

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At our recent live HR Leaders Forum, “Economic and Talent Forecast 2023”, ChapmanCG hosted three experts to provide an economic and HR perspective on the year ahead. Here we share a high-level summary and recording of each presentation. We also include a video of the Q&A session.

Our Speakers

Frances Haque, Chief Economist, Santander

Frances Haque is the Chief Economist for Santander UK, responsible for the retail bank's economic analysis and macroeconomic forecasts.

Frances specialises in Competition and Regulatory economics and has appeared on BBC News, Sky News and Radio programmes, including the Today and Wake up to Money programmes, providing commentary on published economic data and analysis.

Kate Bravery, Senior Partner Global Advisory Solutions & Insights, Mercer

Kate Bravery is a Corporate Psychologist and Senior Partner at Mercer focused on building a talent advantage. At Mercer, she leads their Advisory, Knowledge and Insight functions and is responsible for thought leadership, consultant advisory and solution development.

Kate is also the author of Mercer’s Global Talent Trends report and is currently partnering with the World Economic Forum on the Future of Work agenda.

Kerry Ghize, Partner, UK Career Leader, Mercer

Kerry Ghize leads Mercer UK’s Career business. With 25 years of experience across professional services and Saas, she has led business transformation and commercial strategy at both startup and scaled business stages.

Kerry develops thought leadership and advisory services in the employee experience space and is passionate about achieving business objectives through purpose-led, human-centred leadership.

The Presentations

Frances Haque, Chief Economist, Santander UK

"The Economic Rollercoaster - What is Ahead?"

Frances started by letting us all know that the outlook is slightly brighter than we thought it would be at the end of 2022. A recession is still likely, but it will be shallower and less lengthy.

What follows are some key notes from her presentation that you can watch in full here.

In the decade before 2007, GDP growth across G7 economies averaged 2.4% yearly. In the fifteen years since it has averaged just 1.2%. Accordingly, GDP in the G7 is now around 16% below its pre-2007 trend. At the heart of the problem is a long-term decline in productivity growth in advanced economies. The puzzle is that this productivity slowdown has occurred despite the continued rapid innovation in digital.
There’s no single reason for the productivity slowdown, but the UK has struggled to grow business investment, and although this is not a new phenomenon, it is a distinct problem of the UK. Currently, the level of business investment in the UK is about 8% below where it was before the pandemic. But looking further back, some of this problem has been due to the uncertainty regarding the economic outlook and fiscal planning. The UK was also deeply scarred by the effects of the financial recession, given the makeup of the economy is heavily driven by financial services. In addition, the UK has had access to cheaper imported labour which means the cost-benefit analysis may not always have favoured capital investment. There is also a lack of specific skills in the labour force holding back growth, issues around measuring digital progress, intangible assets and a low-interest environment allowing zombie companies to continue are all factors in this productivity slowdown.
The UK still has much higher inflation levels than other countries – this likely reflects the fact that services inflation is falling slower than goods – given the UK economy is very services driven.
The UK was among the first to increase rates, but the US have been more aggressive about increases.

Frances also shared some Santander resources that may be of interest.

Trade Barometer survey, done every six months, monitors business sentiment towards growth, risk and international trade.
The Santander Navigator has been designed to help explore, prepare and connect with buyers to remove some of the difficulties businesses may face.

Frances Haque Presentation

Kate Bravery, Senior Partner Global Advisory Solutions & Insights, Mercer

“Trials, Trepidation and Trends – Navigating the Talent Landscape in 2023”

The pandemic period, much of which was spent six feet apart, paradoxically brought organisations and their workers closer together. This year brings a moment of profound opportunity: to pick up the tools of empathy learned and honed during this period and carve a new way of partnering that is more relatable, sustainable and attuned to the new shape of work.

Kate’s presentation was led predominantly with insights from Mercer’s most recent global and regional research - bringing together executive, HR and employee views around work and workforce transformation.

2023 will be a defining year as ambitious transformation plans and persistent challenges come face-to-face with new realities. Executives and HR must maintain energy and momentum to prepare themselves and the business for what lies ahead. Geopolitical instability, economic headwinds, and tightening labour markets have profoundly impacted the People agenda.

Mercer’s Executive Outlook report Beat the crisis by focusing on people shares how CEOs and CFOs are responding to economic shocks and talent shortages in uncertain times. For example, in late 2022, 87% of CEOs and CFOs believed the world economy was already in or about to enter a recession. However, less than half (49%) said they were more concerned about inflation’s impact than a recession. In comparison, 43% were optimistic that inflation would be short-lived and expected lower inflation rates in 2023.

If the recession is not a barrier to growth, talent can be. Talent is a business issue, and - as many said - the war for talent is now a war for skills. New talent models are needed, and talent marketplaces are a promising solution that skills-based organisations embrace as they transform with agility.

As per Mercer’s Global Talent Trends Report:

Globally, the areas that have been most difficult to progress are:
- Addressing workforce fatigue
- Redesigning work and/or the organisation
- Enabling new ways of working
Less of a priority for HR in 2023:
- Building careers for older workers
- Updating employee contracts to outline new work patterns and expectations
- Increasing cyber resiliency / mitigating cyber risk

The challenge for 2023: How are companies becoming more resilient, relatable and ready for what’s next?

Shaping the People Agenda will require action in five trending areas:

Reset for Resilience: Build resilience by leading with values and an adaptive design
Work in Partnership: Create equitable, transparent and rewarding partnerships
Deliver on Total Well-being: Nurture a healthy workforce with benefits that matter
Build for Employability: Meet future work needs with a skills-based organisation
Harness Collective Energy: Unlock potential with human-centred work environments

Employee well-being is a top concern for many CEOs and CFOs, influencing their 2023 business planning. People’s safety ranked above many other factors, including financial market volatility and high energy costs.

Mercer highlighted one of the reasons for this in their 2022 Global Talent Trends study, which showed the percentage of employees feeling energised at work dropped from 74% to 63% over the two years of the pandemic’s peak.
The message is clear: Employees who consider themselves “thriving” — associated with higher intent to stay and greater productivity — are three times more likely to say their companies take mental health seriously.

Executives must simultaneously assess risk and balance strategies over the short and long term to beat the crisis. It’s vital to move from risk management to strategic business and people resilience by embracing a “just in case” versus “just in time” approach to risk.

And knowing what is inside employees’ minds is critical for solving their unmet needs. According to Mercer employee research, while job security is a top-five concern for employees in the UK, two in five are considering leaving their current employers. The top three factors that will cause employees to consider leaving are insufficient pay, burnout due to a demanding workload and relationship with boss/ colleagues. The groups most at risk of leaving their employers are blue-collar employees (defined in this study as those on an hourly contract); employees in the food service, retail and hospitality industries; employees in fully remote arrangements; and employees from some minority groups.

Organisations must increase retention efforts, align to workforce needs, focus on financial health, reimagine wellbeing, accelerate DEI and build a more flexible future. Companies that embrace the lifestyle contract - understanding employees’ priorities and meeting their changing needs - will become employers of choice in today’s job market.

ChapmanCG Final Thoughts

Undoubtedly, 2023 will be a time of further change and transformation bringing new challenges and many opportunities. We are now operating in what we used to call the future of work, with many of the changes that started during the pandemic accelerated and are now permanent features of how we work. We are coming out the other side of an enormous amount of change which has been highly positive in many ways, but it has also created a strain on employee well-being, the likes of which we have never seen before. Managing this situation will be a top priority for HR leaders as they focus on embedding well-being for individuals to flourish at work, allowing businesses to reach their goals. These goals also depend on many other factors, including economic stability. Despite high levels of inflation and increased uncertainty in financial markets, it was encouraging to hear both Kerry and Kate report a large amount of economic positivity for the year ahead. While the HR market is more challenging than we experienced last year, it is appropriate to rate the forecast for 2023 as cautiously optimistic.