The Great British Job Crisis: UK experiences worst labour shortage in years

July 25, 2021

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3 min read

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What's going on here?

As the UK experiences its worst labour shortage since the late nineties, more than two-thirds of British companies trying to hire new employees are struggling to find candidates.

What does this mean?

Research from the Recruitment and Employment Confederation (REC) indicates that the number of workers available plummeted in June at the fastest rate since 1997. Some sectors have been adversely affected to a greater degree than others, especially in the transport, hospitality, construction and manufacturing industries. On top of undergoing recruitment struggles among those in typically lower paid or ‘lower skilled’ jobs, the employment market has witnessed labour shortage issues within higher-paying sectors such as accounting, finance and engineering.

Numerous factors can explain the labour market’s plight. A key issue is the so-called ‘rush to re-open’. With the relaxation of pandemic restrictions set to reach its culmination on 19 July, there has been a sharp surge in hiring demand and a subsequent fall in the availability of recruits. Additionally, many sectors whose workforce is primarily overseas workers have suffered as COVID-19 border controls have meant fewer EU workers can travel to Britain, aggravated by tougher post-Brexit immigration rules. During the pandemic, approximately 1.3m non-UK workers have left the UK.

What's the big picture effect?

Despite the sharp surge in hiring, double the number of jobseekers than before the pandemic are competing for each job. Firms are struggling to fill jobs yet more than 2m people are struggling to find work, according to the Institute for Employment Studies. Concerningly, an unemployment crisis and recruitment crisis could unfold simultaneously.

Industry experts are concerned that if we don’t act quickly enough to remedy labour shortages, employers may be forced to increase wages, leading to potentially higher prices and hence rising inflation. Such concerns may already be materialising. Pay for delivery drivers and supply chain workers have already risen due to difficulties in finding staff, meaning that food prices could rise by 5% by the autumn and some food could be in short supply around Christmas. Action must be taken soon if this issue is not to become a market-wide, more prevalent issue.

A key problem that the pandemic and accompanying labour shortage has highlighted is Britain’s skills shortage. A recent survey conducted by Lloyds Banking Group Plc reveals that almost a fifth of businesses report difficulties obtaining staff with the right skills. Although easing post-Brexit immigration rules for overseas workers may be one solution to labour shortages, business leaders have suggested that companies could accept less experienced domestic staff (including furloughed and prospective workers) and train them themselves to equip them with necessary skills. This initiative would need to be bolstered and incentivised by government funding or support for businesses who undertake such training, helping to close the workforce’s skills gap and boost the UK’s post-pandemic economic recovery.

Employers’ difficulties with recruitment may force them to reconsider the attractiveness of their working environment. Certain industries, especially the hospitality sector, are notorious for their ruthless cultures of long, unsociable hours, poor conditions and low pay. To alter these undesirable statuses, certain sectors may need to adopt more flexible working patterns and attractive conditions to lure candidates from a wider talent pool. Additionally, once COVID-19 restrictions are lifted indefinitely, jobs in some sectors (including hospitality and retail) may automatically become more appealing as they will lose their reputation for being unstable: a reputation which stemmed from unpredictable lockdowns.

Report written by Lauren Ainscough 

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