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2nd August 2023

Quarterly Recruitment Outlook: People Problem Key To Tackling Inflation

  • Government must fix people problem to ease inflation and take pressure off interest rate rises
  • 79% of businesses surveyed (92% of whom are SMEs) attempting to recruit have faced challenges, with hospitality and construction firms the most likely to report difficulties
  • Three in five (60%) businesses attempted to recruit in the quarter

The latest Quarterly Recruitment Outlook (QRO), a survey of 4,800 UK firms of all sectors and sizes by the British Chambers of Commerce (BCC) reveals there is still no easing in the record high difficulties in finding staff.  

The second quarter results for 2023 show that the percentage of firms facing recruitment difficulties has fallen just three percentage points from the historical high of 82% in Q4 2022. This has now remained above 75% for the last two years.

Attempted recruitment in Q1 was virtually unchanged from the previous quarter, with 60% of those surveyed looking to find staff (59% in Q1 2023).

While recruitment difficulties are being experienced across the economy, the construction & engineering, and hospitality sectors were the most likely to report problems with 86% of firms reporting difficulties (up from 81% and 83% respectively in Q1). This is closely followed by manufacturing on 81% (83% Q1) and then professional services on 77% (79% Q1).

Of the firms in the construction & engineering sector facing recruitment difficulties, 76% faced difficulties in finding skilled manual/technical workers. However, for hospitality businesses that struggled to recruit, 69% faced difficulties in finding semi/unskilled workers.

Investment in training remains stubbornly low with just over a quarter of firms (27%) reporting an increase in their training investment plans over the last three months (the same as Q1), while 14% report a drop (also the same).

In terms of cost pressures, the data show that the main factor for increasing prices is now coming from wages rather than utility bills or raw materials.

With concern around utility costs dropping, 63% report these as an issue (74% in Q3 2022), the number of firms reporting labour costs as a source of pressure has risen to 68% (67% in Q1) and is now the lead cost pressure.   Although, overall, the percentage of firms expecting their prices to rise fell below 50% for the first time since Q3 in 2021.

Responding to the findings, Jane Gratton, Head of People Policy at the BCC, said:  

“The tight labour market continues to ramp up wage costs, fuelling inflation, and creating huge difficulties for businesses. With the Bank of England expected to increase interest rates again, it is vital that Government boosts efforts to increase the supply of labour to help break the cycle.

“Firms are being squeezed on all sides.  With 36.8 million jobs in the economy there are more employment opportunities than ever before.  But we also have low unemployment, and over a million jobs are currently left unfilled.   Firms cannot fulfil order books and are turning down new work.

“They are caught in a vicious circle where the lack of people holds back growth and reduces opportunities for investment, including in training – part of the long-term solution.

“While firms can do more to make workplaces more flexible and jobs easier to access, the government must redouble its efforts to support people into work.

“But where there is evidence of critical national skills shortages, that are crippling business sectors and pushing up wages, the government must look again at the role immigration can play in easing difficulties in the short term.  This includes making sure the criteria for the Shortage Occupations List are proportionate and realistic, as well as expanding access to youth mobility schemes.

“Access to a skilled workforce is a major concern for businesses across the UK. The longer these shortages continue, the more long-term damage is caused.  Government has made a start but has yet to shift the dial. If we are to get the economy growing again we need more action, now.”

Commenting on the findings, Paul Butterworth, CEO for Chambers Wales South East, South West and Mid said:

“The British Chambers of Commerce’s QRO revealing that 79% of businesses in the UK (including 92% of SMEs), are facing recruitment challenges is not surprising news. Our members highlight this continually.

“Wage inflation and the cost-of-living crisis continue to play a huge factor in recruitment difficulties, with businesses already stretched financially after 3 years of economic uncertainty and heightened costs.

“Our 2023 Quarterly Economic Survey for Q2 found that Welsh businesses are facing the most difficulties in recruiting both skilled, manual and professional roles.

“Businesses are facing a more restrictive landscape for skills, with more difficulty in securing work experience and apprenticeships than ever, as support has reduced”.

“Investment in training is stagnant, with only 25% of Welsh businesses increasing their training plans in the last three months, for Wales, and this is reflected nationwide in the QRO at 27%.

“Policymakers and the Bank of England must act to ease pressures on cost for businesses. Skills is one of the largest barriers to growth for the Welsh economy today.

“Ensuring a cohesive approach between education and the private sector can help bridge the gap in the long term, while changes to the shortage occupation list, increased funding for skills training and reskilling could ease tensions in the short term.

“Our Chamber is committed to helping businesses bridge the skills gap through our Chamber Academy which is currently in development.”

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