Easing the UK's labour shortages

Although May's low unemployment figures were good news in some respects, they also showed over a million unfilled vacancies. These vacancies highlight how persistent labour and skills shortages are hitting growth and business investment while exacerbating the cost-of-living crisis.

This has led to business groups to demand the government takes action to tackle these labour shortages. Here, we look at what these groups are recommending, as well as the some of the help for employers that is already in place.

Rapid reform

The British Chambers of Commerce (BCC) says that rapid reform is needed to tackle the 'crippling staff shortages' that have created 1.3 million unfilled jobs in the UK economy.

The BCC's figures show that during the second quarter of the year 61% of firms were looking to find staff, but more than three quarters of firms continue to report recruitment difficulties. It says that construction; production and manufacturing; logistics; and hospitality are facing the greatest difficulties recruiting staff, but all sectors have significant issues.

Three-point plan

The BCC has proposed a three-point action plan to tackle the substantial number of unfilled vacancies.

Firstly, it says that firms must be encouraged to find new ways of unlocking pools of talent – by investing more in training their workforce, adopting more flexible working practises and expanding use of apprenticeships.

Secondly, it wants to government to help employers invest in training by reducing the upfront costs on business and providing training related tax breaks.

Finally, the BCC says the Shortage Occupation List (SOL) should be reformed to allow sectors facing urgent demand for skills to get what they need. The SOL governs immigration rules according to the demand for skills by both job type and region.

The skills the country needs

The BCC says the SOL is not currently fit for purpose and should be more flexible, so that it supports firms experiencing a national recruitment crisis. The Confederation of British Industry (CBI) agrees that the government should urgently update the SOL in parallel to developing genuine strategies for homegrown skills.

It says it is time to set out the skills the country needs, including identifying what talent can be developed at home, and then making smart use of immigration to plug the shortfall.

The Apprenticeship Levy

In addition, the CBI says the Apprenticeship Levy works well for some firms and sectors, but not for others. For many, it has become a psychological barrier to skills investment as well as a financial one.

The business group says the Levy should be reformed so that it can be deployed in a more flexible, modular way – enabling firms to target their most pressing skills, such as green and digital, to help with reskilling, as well as being an effective route to getting young people into the world of work.

Workforce for the future

The CBI says these steps will help the UK build a workforce for the future. It says that around nine in ten workers will need to add to their skills by 2030. Achieving net zero will require a major push on green skills and other skills associated with delivering major projects. Two-thirds of firms currently have digital skills vacancies.

The CBI concludes that the UK has labour shortages and skills shortages, and it is time to get serious about addressing them both.

Kickstarting training

The government has introduced some schemes to enable jobseekers to gain the skills they need to get jobs and provide targeted help for young people to get into work.

The Kickstart Scheme funds the direct creation of high-quality jobs for young people at the highest risk of long-term unemployment.

It is a £2 billion fund to create hundreds of thousands of high-quality six-month work placements aimed at those aged 16-24 who are on Universal Credit and are deemed to be at risk of long-term unemployment. Funding available for each job covers 100% of the relevant National Minimum Wage for 25 hours a week plus the associated employer national insurance contributions (NICs) and employer minimum automatic enrolment contributions.

Training and apprenticeships

The government is also funding high-quality traineeships for young people by paying employers who provide trainees with work experience £1,000 per trainee. 

Providing opportunities

Despite the current challenges, many businesses are looking to the future. They must invest wisely, using the available government support to develop a skilled, motivated workforce.

We are happy to advise in detail on the best approach to suit your circumstances. Please contact us for more information.

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