LONDON (Reuters) – Beneath the headline figures showing a strong British labour market, the ebb and flow of jobs and businesses being created and destroyed is showing a pattern associated with the onset of recession, research suggested on Monday.
Employers in Britain created almost 400,000 jobs last year, pushing the jobs rate to a new record high – a bright spot in a slowing economy weighed down by Brexit worries and weakening global trade.
But academics at the Enterprise Research Centre, a research network, said there were some unpromising signals when looking at the jobs data split between new and existing firms.
Start-up businesses contributed roughly 1 million jobs in 2018, cancelling out a net 613,000 drop in employment across established companies.
This looks unlikely to be sustained, with the rates of business “births” and “deaths” now converging – often a poor omen for the economy, particularly if the death rate overtakes the birth rate.
The authors of the report said this trend should be viewed in a longer-term context, rather than as a result of temporary Brexit uncertainty sweeping the economy.
Mark Hart, professor of entrepreneurship at Aston Business School, said the official data showing record employment could lull policymakers into a false sense of security.
“Even if our headline employment figures are being propped up by start-ups creating new jobs, we are already witnessing a severe slowdown in hiring by the established firms that are vital to the health of our economy,” Hart said.
Recent short-term business surveys have pointed to a fall in employment, although most attribute this to uncertainty ahead of Brexit.
Britain is due to leave the European Union on March 29, although Prime Minister Theresa May has opened up the possibility of a delay given her inability to secure parliamentary ratification of the deal so far.
Amid the uncertainty, the world’s fifth-biggest economy has shown signs of slowing and the Bank of England expects the weakest growth in 2019 since the global financial crisis, even if May manages to clinch a Brexit transition deal.
(Reporting by Andy Bruce; Editing by Mark Heinrich)