Businesses investing less in recruitment as skills shortages bite, says survey

Talent availability going backwards as employers adopt a ‘grow your own’ approach by emphasising upskilling

Businesses investing less in recruitment as skills shortages bite, says survey

The number of employers experiencing skills shortages has increased in the past year, a study has found, prompting businesses to begin investing more in their existing workforce.

A survey of 950 business leaders, as part of the Open University’s (OU) annual Business Barometer, found 63 per cent of firms were experiencing skills shortages, up a percentage point on last year. 

Similarly, 68 per cent of employers reported they were unable to find suitable candidates to fill roles and more than half (55 per cent) said they had “struggled” in the last 12 months because of skills shortages.

As a result, 62 per cent of senior business leaders felt their business was not as agile as it needed to be, due to a lack of skills.

The report also found organisations were spending less on bringing talent in from outside and instead were investing in their existing workforce. Businesses paid out 30 per cent less this year on recruitment – £4.4 billion in 2019 compared to £6.3 billion in 2018.

More than half (53 per cent) were taking a “grow your own” approach to talent, increasing their investment in learning and development initiatives, and 71 per cent said they believed training existing workers was a more sustainable approach to addressing skills shortages.

The report also found businesses spent more than £1.1 billion training up staff who were hired despite lacking sufficient skills or qualifications.

David Willett, corporate director at the OU, said skills did not have to be bought but could be built. He said: “By upskilling and retraining the current workforce, organisations will have all the skills they require, along with the knowledge and experience to drive them forward.”

Tej Parikh, chief economist at the Institute of Directors, told People Management that high employment levels and falling immigration meant businesses were finding it harder to source talent. “Reforms to our training agenda, such as greater flexibility in the apprenticeship levy and funding for schemes aimed at raising management capabilities, cannot come soon enough,” he said. 

The OU report acknowledged that the current business landscape was challenging, citing Brexit uncertainty and “relentless” digital development as major factors, but said the only way to overcome these obstacles was with a highly skilled workforce.

The report warned that nearly half (47 per cent) of organisations would begin to struggle financially as a result of talent shortages, but said a shift in gear by employers could even the scales.

Since last year, the skills shortage seemed to have worsened most in the agriculture, forestry and fishing sector, where the number of organisations experiencing issues has nearly tripled in the past 12 months, the report said.

While the property sector was the least likely to be experiencing a shortage – followed closely by wholesale and retail – this could be due to “sector attractiveness” or a reliance on low-skilled individuals and automated machinery.