Low unemployment leaves fewer options for businesses

With the UK unemployment rate at its lowest level since the 1970s, employers are finding it increasingly difficult to recruit the right people. Just four per cent of the population is currently jobless, resulting in a growth in wages and a consequent increase in labour costs in some industries.

The highest demand for workers across the UK is in London, where the level of vacancies is 30.6 per cent above average and there are more vacancies for directors and CEOs, software engineers, graphic designers and chefs than anywhere else. The North West follows closely behind, with vacancy levels sitting at 25.69 per cent above average. Nurses, social workers, mechanical engineers and welders are particularly in demand in this area.

A recent Guardian article reported that while wages have stagnated or dropped in health and social work, utilities, agriculture and the arts, the fastest pay growth was found in the construction, financial services and hospitality industries, indicating the recruitment struggles in those areas.

The looming deadline for Britain leaving the EU is a concern across every industry, with many businesses expecting recruitment to become even more difficult as the government places new restrictions on incoming workers.

A shortage of skills and people

According to the 2017 Employer Skills Survey, hotels and restaurants are struggling more than any other industry to recruit new workers. The number of young employees that make up much of the hospitality workforce has begun to dwindle as a result of both a lower birth rate and a drop in the popularity of catering as a career choice. Chefs are now the most in-demand skilled trade in the UK, with accommodation and food service businesses advertising 4.1 vacancies for every 100 people employed in the industry. This trend is especially pronounced in London, where demand is 38.5 per cent above the UK average.

A similar shortage is hitting the IT industry, which the survey says is second only to the hospitality sector in the number of hard-to-fill vacancies. With technology a high-growth area across a wide range of industries, the UK is not producing people with the right IT skills to meet this growing need, according to the trade body Tech UK. This is exacerbated by a cap placed by the British government on skilled overseas workers eligible for Tier 2 visas. The need is felt most keenly in London and the south of England, where the demand for workers is up to 48 per cent greater than average.

The lack of sufficiently skilled workers has also hit the construction industry, which comes out on top of every other sector when it comes to positions left open for six months or more as a result of applicants not having the right training. The building trade has suffered from a skills shortage since 2014, when business picked up as it began recovering from the financial crash. However, this year the industry witnessed year-on-year wage growth increasing almost 50 per cent faster than the economy as a whole. Many workers dropped out of the industry after the 2008 crash and the numbers are not being replenished by EU nationals, another potential consequence of Brexit. This is worsened by large numbers of construction workers heading for retirement, leaving companies’ profit margins to take the hit.

Challenges in a range of industries

It’s not just private sector companies that are affected; in the NHS, austerity and the introduction of the public sector pay freeze have pushed the vacancy rate up by more than 50 per cent in the last five years. According to the Institute for Government think tank, this rate is unlikely to be affected by recent moves to ease the pay cap. With wages having fallen in real terms over seven years, some NHS workers only saw an initial increase of 1.5 per cent as part of a deal introduced in July this year. While nearly all workers should end up with a three per cent rise by the end of March 2019, NHS Improvement has warned that vacancies will become even more common over the rest of the financial year, with demand for nurses in the North West and London already close to 30 per cent above the national average.

The changing nature of UK high streets has led to staff shortages in other areas. As traditional shops have vanished, they have been replaced by an increasing number of leisure-related industries such as hairdressers, beauticians, coffee shops and tattoo parlours. However, respondents to the Employers Skills survey indicated that even these sectors are not immune to the struggle to attract new workers. With half of workers in the beauty sector under 30 years old, the same dip in birth rate that has affected hospitality is impacting here too. A significant percentage of this workforce is also made up of immigrants on minimum wage, a resource that has been reduced significantly as Brexit uncertainty takes its toll.

The problems of wage growth and recruitment are unlikely to ease in the near future, with overseas workers unprepared to risk moving during a perpetually unresolved Brexit process and systemic skills shortages in construction, hospitality and IT. Risk managers in the industries most affected will need to be prepared for significant impact on their business operations.

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