UK Employers Wary of Future, Lack Spare Capacity Amid Brexit Uncertainty

UK Employers Wary of Future, Lack Spare Capacity Amid Brexit Uncertainty

A new survey of employers in the UK shows that uncertainty over Brexit and labor market worries continue to shake business leaders’ confidence in the country’s economic future, the BBC reports:

A survey of 601 employers by the Recruitment and Employment Confederation (REC) found 31% expect the economy to worsen, with only 28% expecting it to improve. … The REC’s measure of confidence has turned negative in the space of a month. In July the number of those employers who felt confident about the economy outweighed the pessimists by 6 percentage points. …

The REC’s JobsOutlook survey showed that 40% of employers had no spare capacity and one in five planned to take on more permanent staff to meet additional demand. However, their biggest problem was finding the right candidates, especially in the construction industry, for either temporary or permanent positions.

In the wake of June’s surprise election result, in which Prime Minister Theresa May’s Conservative party lost its majority in Parliament, the UK has faced even greater uncertainty as the government is proceeding with Brexit negotiations with a weakened hand. After the election, both business and labor leaders called on the government to take steps to strengthen the domestic labor market—but there may be limits to what the government can achieve in that regard.

In the meantime, People Management’s Hayley Kirton solicits the opinions of some experts as to what employers can do to face down the capacity challenge illuminated in the REC survey:

David Willett, director at The Open University, said: “UK employers are faced with a chronic skills shortage, partly exacerbated by the uncertainties surrounding Brexit, which is why employers need to start looking at recruitment and staff development differently. It is now more important than ever that organisations invest in their workforce, to build up the skills they need, rather than buying them in from elsewhere, which can be costly and time-consuming.”

And Lizzie Crowley, skills adviser at the CIPD, said: “In light of Brexit, there is considerable uncertainty about the future ability of UK businesses to recruit EU migrants to fill shortage areas. This highlights the critical importance of understanding the demographics of your workforce and having a workforce development plan in place to address the current and future skills needs of your business.”

Kirton points to some research published last month by the Open University, which found that skills shortages were forcing UK businesses to spend an additional £2.2 billion a year on salaries, recruitment, and temporary staff. A similar report in May found that candidate availability was declining at a rapid pace, driven by citizens of EU countries either leaving the UK or declining to look for work there due to uncertainty over whether they will ultimately be allowed to stay.

There is no shortage of work to be done—UK employers, by and large, planned to expand this year—but employers and labor market observers remain concerned that the UK cannot meet its labor needs, particularly in skilled professions, without employers either tapping into the European talent market or taking significant steps to develop domestic talent. The UK’s latest official statistics, which Kirton flagged upon their release Thursday morning, show that net migration has fallen to a three-year low:

According to Office for National Statistics (ONS) figures released this morning, estimated net migration – the difference between immigration and emigration – dropped to +246,000 in the year to March 2017, down 81,000 compared with the year before and the lowest it has been since March 2014. The change was largely attributed to a sharp decrease in net migration from EU citizens, which was down by 51,000. In particular, emigration rose by 17,000 among people from the EU8 countries: Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Hungary and Slovenia.

These figures do not necessarily prove that Brexit will seriously harm the talent market, but the ultimate impact still remains to be seen:

Gerwyn Davies, senior labour market analyst at the CIPD, pointed out that net migration from the EU remained above the average level seen before the bloc expanded to its current 28 member states. “Initial fears that Brexit would have a material impact on employers’ ability to fill vacancies therefore seem to be somewhat premature,” he said.

“While employers may be breathing a temporary sigh of relief, it remains to be seen how many EU citizens are still in wait-and-see mode before the negotiations have been resolved. The outcome of the government’s post-Brexit EU immigration policy could become a significant factor in deterring some EU nationals from coming to the UK, especially if the axe falls particularly hard on low-skilled roles.”