Recruiters facing ‘supply shock’ as migrant workers shun UK, CIPD data reveals

Experts say full-capacity workforce may mean higher wages – but greater pressure for existing employees too

Employers’ recruitment efforts are being affected by worsening labour and skills shortages, research by the CIPD has revealed – with a fall in the number of migrant workers arriving in the UK in the run-up to Brexit creating additional pressures on existing staff. 

The latest quarterly Labour Market Outlook from the CIPD and The Adecco Group found that more than two in five UK employers (44 per cent) reported it had become “more difficult” to fill vacancies in their organisation over the past 12 months. Seven in 10 (70 per cent) said at least some of their vacancies were proving hard to fill.

Of the 1,002 employers surveyed, 34 per cent said retention pressures had risen over the same period.

Gerwyn Davies, senior labour market analyst for the CIPD, said: “It is good news for workers and jobseekers that the labour market is operating at, or close to, full capacity. However, the downside is that rising skill and labour shortages will lead to higher workloads for some workers. Employers and line managers therefore need to be challenged and encouraged to adopt more sophisticated HR and management practices such as high-performance working.”

The report revealed skills and labour shortages were pushing up pay as employers respond to the shortfall.

Almost half of organisations which reported heightened recruitment difficulties (48 per cent) have increased starting salaries in response, and 27 per cent have done so for the majority of vacancies. 

Davies warned that while continued recruitment and retention pressures may raise earnings for some, weak productivity growth and continuing uncertainty over Brexit are likely to restrict earnings growth of other workers in the coming months.

Alex Fleming, country head and president of staffing and solutions for The Adecco Group UK and Ireland, said: “Our clients are often surprised at the market rates when they are making talent attraction decisions. This ‘supply shock’ and other pressures will only serve to increase these difficulties, which could easily flow out into the rest of the workforce. In turn, this could cause a wider upward movement on wages.” 

Fleming warned employers should be aware that wages are not the only answer. “We’ve seen wider benefits packages, which include flexible working and a good culture, often win over a simple increase in salary,” he said.

Davies added: “It’s vital that businesses understand the workforce challenges they face, and make the relevant investment in skills and adopt the right people management practices to boost productivity in their organisation.”

The squeeze on skills has been exacerbated by a fall in the number of non-UK-born workers employed in the country. 

Between April and June last year and the same period this year, the UK saw a net decrease of 58,000 overseas-born workers. Across the same time frame in 2016-17, there was an increase of more than a quarter of a million (263,000) migrant workers. 

Both EU and non-EU migrants have dropped over the latest period. And it is predicted labour supply will be further constrained from 2021, when migration restrictions for EU citizens are introduced, which the government has said will be aimed primarily at lower-skilled workers

One third (33 per cent) of employers who currently employ non-EU citizens said the administrative burden of using the current points-based system for visas, which may well be extended to cover EU citizens from 2021, is too great.

Davies said the findings highlight the risk more overseas-born citizens and employers will be discouraged from using the post-Brexit system if more support is not provided. He added it needs to be “made simpler, fairer and more affordable, especially for lower skilled roles.

“The data implies the pendulum has swung away from the UK as an attractive place to live and work for non-UK-born citizens, especially non-EU citizens, during a period of strong employment growth and low unemployment. This has heightened recruitment difficulties for some employers.”

Dean Forbes, CEO of CoreHR, added: “The pressure falls on HR leaders to find the right solution for their business to attract and retain talented employees. Knowing how your organisation could be affected and having a contingency plan to balance any negative impact is the first step. 

“HR [departments] must now take a fresh look at current employment strategies and reassess whether they are rightly balancing the needs and wants of both the business and employees.”