The UK employment growth rate is set to slow in what the Chartered Institute of Public Development are calling a ‘productivity hangover’.

A survey of almost 1,000 employers revealed that 11% fewer firms said that they would be employing more staff than last year.

This hangover effect is due to firms continuing to increase employment over a sustained period of falling output.

Despite this, the survey found that SMEs were more positive about future employment rates. Gerwyn Davies, the CIPD’s Labour Market Adviser, said:

“The continued high level of recruitment intentions among small firms – far exceeding those of their larger counterparts – is welcome.  As these small firms seek to grow rapidly it is important they are equipped to hire the right people and to rise to the management challenges associated with growth.

“Policy makers are rightly focused on supporting this important ‘engine room’ sector of the UK economy.”

Another symptom of this ‘productivity hangover’ is below inflation pay rises – 71% of employers said they would be awarding pay increases of 2% or less.

Mr Davies continued:

“The challenge for managers will be to find ways to continue motivating employees who find their pay lagging behind inflation, and in many cases are struggling to pay bills and mortgages.”