Employers warned of recruitment challenges ahead as job applications drop

CIPD’s Labour Market Outlook finds number of EU nationals entering the UK workforce remains subdued

The UK has experienced a sharp drop in the number of people applying for lower-skilled jobs, as the number of EU workers entering the labour market remains low, according to a new study.

The latest Labour Market Outlook, compiled by the CIPD and Adecco, found the number of people applying for low-skilled roles dropped by a fifth over the last year – with the median number of applicants for these jobs falling from 20 to 16 – suggesting some employers may face recruitment challenges in the coming months.

The CIPD suggested that this was in part caused by a further fall in the number of EU-born citizens in employment in the UK, which remains well below pre-referendum levels.

Applications for medium and high-skilled vacancies also saw a relatively modest fall compared to last year, but this was cushioned by an increase in the number of non-EU citizens coming to work in the UK, according to CIPD analysis of Office for National Statistics data. This was mainly driven by the recruitment of nurses and other medical staff following the removal of the migration cap for doctors and nurses last June.

In total, 123,000 non-EU citizens entered the workforce between the start of 2018 and the start of 2019, and non-EU citizens accounted for more than a third of the increase in employment over that period.

The Labour Market Outlook is based on a poll of 2,104 employers conducted in June 2019.

Gerwyn Davies, senior labour market adviser for the CIPD, said the UK labour market was “holding up surprisingly well” amid the current political uncertainty. “Labour demand remains strong, and the robust supply of non-EU workers has helped many employers meet this demand, partly owing to the government’s decision to remove the migration cap for doctors and nurses,” Davies said.

“This has been key to freeing up visa capacity for employers in other sectors, which have sensibly been able to resolve skill shortages by hiring non-EU migrants.

“Looking ahead, the government’s post-Brexit immigration policy must demonstrate similar levels of flexibility to ensure that such shortage occupations benefit from a more generous minimum salary threshold.”  

But Davies warned that alarm bells were sounding for employers trying to fill lower-skilled roles, and many firms were still taking a ‘wait and see’ approach. “It’s essential that those employers are prepared for reduced numbers of candidates and further restrictions to low-skilled labour planned from 2021 with a workforce plan,” he said.

The fall in job applicants has put upward pressure on pay for a significant minority of organisations. More than a third (36 per cent) of employers expect basic pay to increase more than 3 per cent in the 12 months to June 2020, compared to 28 per cent over the same period last year. 

However, overall median basic pay increase expectations remain steady at 2 per cent. The private sector has seen pay expectations rise from 2 per cent to 2.5 per cent, while the public sector has gone from 1 per cent to 1.5 per cent.

Inflation was the most cited cause of pay increases (43 per cent), followed by the rate of pay elsewhere (37 per cent), with less than a third (29 per cent) citing recruitment and retention difficulties.