Read: Deep dive into the labour market to fix skills shortage
New research published this week has thrown the impact of the skills shortage in the UK into sharp relief.
The report by the Open University and the British Chambers of Commerce, based on a survey of over 1300 organisations of all sizes from the public, private and third sectors, looks at skill shortages, recruitment challenges and the effect of flexible working on skills availability. It also examines how employers are responding through business planning and employee training.
The research reveals that almost 86 per cent of large organisations currently face skills shortages, with nine in ten implementing a formal plan to address them. In contrast, 68 per cent of SMEs face similar shortages but are struggling to introduce a response to tackle the problem. Seventy-eight per cent of all organisations are seeing reduced output, profitability or growth as a result. Seventy-two per cent say the impact of skills shortages is causing increased workloads for other staff, with 28 per cent of businesses reporting that they have had to turn down work or are not able to bid for it due to staff shortages. Despite three out of four companies being affected by a shortage of skilled workers, over half the organisations surveyed said they do not have any specific initiatives, skills programmes or workplace adjustments in place to attract underrepresented groups such as people with disabilities or workers from diverse ethnicities.
It's a bleak picture, and a situation which has its roots in the twin seismic shocks of the twenty-first century - Brexit and Covid. The 2016 referendum ended freedom of movement of labour within the EU with little prospect of a reversal in policy anytime soon. The spectre of Covid continues to haunt the UK labour market, with a huge rise in the number of economically inactive people since the pandemic - those not in work or not seeking it - with retirement and long-term ill-health both cited as drivers. A survey by employment group, Manpower, earlier this year reported that the number of employers reporting skills shortages has increased six-fold over the last decade, and more than doubled since pre-Brexit and the pandemic.
That increase underlines why the private sector, alongside the third sector and government, needs to take a new approach to addressing skill shortages and explore how it can find talent in economically active groups which have previously been hard to reach. From our partnerships in the Purpose Business Coalition, it’s clear that many companies already understand the problem and are getting to grips with it, mining talent from as wide a pool as possible, with a particular focus on underrepresented groups. They’re following the old adage that you should never let a crisis go to waste and are creating opportunities out of this particular labour market emergency, mining every potential source of talent to find innovative ways to work with individuals who may have fallen out of the labour market because of Covid, or whose potential has never been tapped. The current employment rate of disabled people, for example, is 53.7% compared to 82.7% for people who are not disabled, a gap which has singularly failed to close significantly over the last decade.
Business Coalition members work upstream in their communities, engaging in outreach with local schools and colleges in their communities to inspire and inform those who don’t have a contact network, or family experience of work to draw on. There is a concerted focus on recruiting those who may not have conventional academic backgrounds or who come from groups facing particular challenges such as care leavers, those leaving prison or former members of the armed forces. Apprenticeship programmes are an important route into work and many businesses are actively encouraging more women to apply for traditionally male-dominated roles, as well as older workers whose personal circumstances may have prevented them from considering that option earlier in life.
It’s clear from the study that SMEs face particular challenges in terms of operational ability and financial resilience. The Purpose Business Coalition has been working with SME4Labour to look at the vital role that they play in our national and local economies and the opportunities they can deliver. Its report, recently launched by Bill Esterson MP, Shadow Minister for Business and Industry, featured examples of best practice from Business Coalition partners together with independent recommendations to put SMEs at the heart of the business agenda and to ensure they are more effectively supported.
The period ahead is key. On all sides, we need a more proactive response to finding solutions to the skills shortage. The best businesses and third sector organisations are determined to rise to that challenge. The big question is whether the state has the appetite for innovation and the willingness to invest up front to reap the rewards of a more productive economy.
Rt Hon Lord Walney
