UK employers struggle with worst labour shortage since 1997

Rush to reopen and departure of overseas workers have caused problems in areas including transport, hospitality and construction

Britain’s employers are struggling with the worst staff shortages since the late 1990s, amid the rush to reopen from lockdown and a sharp drop in overseas workers due to Covid and Brexit.

Sounding the alarm over the risks to economic recovery from acute labour shortages, the Recruitment and Employment Confederation (REC) and the accountancy firm KPMG said the number of available workers plunged in June at the fastest rate since 1997.

Recruitment firms are reporting hiring challenges across several sectors of the economy, led by shortfalls in areas such as transport and logistics, hospitality, manufacturing and construction.

Graphic – shortages

As well as the trouble recruiting chefs, kitchen porters, cleaners and warehouse staff recorded in previous months, the snapshot indicated that issues for employers were spreading to typically higher-paying sectors such as finance, IT, accounting and engineering.

“We need action from businesses and government to reskill and upskill furloughed and prospective workers now more than ever, as the increasing skills gap in the workforce has the potential to slow the UK’s economic recovery,” said Claire Warnes, head of education, skills and productivity at KPMG UK.

The rush to reopen after pandemic restrictions is leading to bottlenecks. Employers are finding added complications as fewer EU workers travel to Britain because of Covid-19 border controls and the government’s post-Brexit immigration rules.

Graphic – demand

According to the REC and KPMG survey of more than 400 recruitment firms, a sharp rise in hiring demand led to the unprecedented fall in the availability of candidates in June. Recruiters noted that increased hiring, Brexit, pandemic-related uncertainty and the furlough scheme all weighed on the number of jobseekers available.

Official figures show about 1.5 million workers are still furloughed with pandemic restrictions still limiting a full return to work, after the government pushed back the date for the end of most pandemic restrictions to 19 July and the Delta variant fuelled rising infections.

Rishi Sunak last week started to wind down the multibillion-pound jobs scheme, which is due to close at the end of September. At its peak almost 9 million jobs were furloughed during the first wave of the pandemic, with about 5 million in the wave in January this year.

Graphic – unemployment

Unemployment in the UK has fallen in recent months as firms scrambled to hire, dropping to 4.7%, or about 1.6 million people. The Bank of England forecasts that unemployment would rise to 5.5% after furlough ends. However, this is significantly below expectations last year that Covid-19 would drive up job losses at the fastest rate since the 1980s, leading to 12% unemployment.

In a sign of the growing pressure on companies, surveys from the British Chambers of Commerce published on Thursday showed 70% that had tried to hire staff in the three months to June had struggled to do so.

According to the poll of 5,700 companies, 52% said they tried to hire staff over the three months to June. The sectors with the biggest problems recruiting workers were construction, hotels and catering, and manufacturing.

Jane Gratton, head of people policy at the BCC, said part of the issue for employers was that skills shortages that had existed in Britain before the pandemic were becoming apparent once more as the economy reopened. “The encouraging increase in job creation across the manufacturing and services sectors is being held back by recruitment difficulties at all skill levels, jeopardising growth and productivity,” she said.

Claimants map

An estimated 1.3 million non-UK workers have left the country during the pandemic. Business leaders said easing post-Brexit immigration rules could help address shortages, but also called for further investment in skills and training from the government to increase the numbers of domestic candidates.

Employment experts believe people are being put off from work in certain sectors that have developed reputations for low pay and poor conditions in recent years, and that concerns over continuing high rates of Covid-19 are also having an impact.

Sustained labour shortages could lead employers to push up wages, which could in turn feed through to rising inflation if companies raise their prices to accommodate higher wage bills. However, there is debate about whether bottleneck pressures as the economy reopens from lockdown will translate into a permanently tighter jobs market.

Neil Carberry, the chief executive of the REC, said: “The jobs market is improving at the fastest pace we have ever seen, but it is still an unpredictable time. We can’t yet tell how much the ending of furlough and greater candidate confidence will help to meet this rising demand for staff.”

Contributor

Richard Partington Economics correspondent

The GuardianTramp

Related Content

Article image
UK employers plan to keep hiring despite Brexit and slow growth
Manufacturers are most optimistic about recruiting but public sector looking to cut jobs, ManpowerGroup poll finds

Katie Allen

13, Jun, 2017 @5:01 AM

Article image
More than a third of UK employers planning to make staff redundant
Report warns of a cascade of job losses as coronavirus furlough scheme winds down

Jasper Jolly

30, Sep, 2020 @11:01 PM

Article image
‘We’re all in the same boat’: employers on worker shortages in England
Firms from fruit-growers to lorry operators and hotels are finding it impossible to recruit enough staff

Sarah Butler, Gwyn Topham and Julia Kollewe

08, Jul, 2021 @5:00 AM

Article image
UK ‘faces labour shortage’ as Covid and Brexit fuel exodus of overseas workers
Experts say recovery at risk amid sharp fall in EU workers and dwindling interest in UK jobs from abroad

Richard Partington Economics correspondent

16, May, 2021 @11:01 PM

Article image
‘I can’t work in the office safely’: the over-50s leaving the UK labour force
The number of economically inactive 50- to 64-year-olds has shot up. Some can simply afford to retire – but many have long Covid or other health issues

Heather Stewart

02, Nov, 2022 @6:00 AM

Article image
Employers squeezed as job vacancies grow to record levels
UK firms struggle to find staff as unemployment falls to lows not seen since the mid-1970s

Richard Partington Economics correspondent

19, Feb, 2019 @12:42 PM

Article image
UK employment growth driven by foreign nationals, figures show
Jobs data show workers face rising costs and static pay, and no indication of Brexit vote triggering exodus of EU labour

Angela Monaghan

15, Feb, 2017 @4:49 PM

Article image
Most UK firms plan to invest less in next three years, finds survey
Covid-19, risk of no-deal Brexit and geopolitical tensions are dragging down spending

Phillip Inman

20, Jul, 2020 @6:00 AM

Article image
Exodus of more than half a million from workforce ‘puts UK economy at risk’
Loss of employees since Covid raises fears of weaker growth and higher inflation, says Lords report

Richard Partington Economics correspondent

20, Dec, 2022 @12:01 AM

Article image
UK employers expecting to award pay rises of 3% this year, survey shows
Businesses struggling to fill vacancies will offer highest rise for a decade –but lower than inflation

Jasper Jolly

14, Feb, 2022 @12:01 AM