Four in ten UK firms facing staff shortages

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Date: 17 August 2021

An attractive young woman has her first job interview

Research conducted by the Institute of Directors has found that 44% of businesses are currently struggling to recruit the staff they need.

The Institute of Directors (IoD) has polled more than 700 of its members to find out how extensive the staff shortages are and what is driving them. Its findings show that the majority (65%) of those affected say the problem has been caused by the UK's long-term skills gap.

However, the findings suggest that Brexit and the pandemic are also having a significant impact on staffing:

  • 38% say there is a lack of potential employees from the EU;
  • 21% say shortages are occurring because staff are being told to self-isolate;
  • 21% say furloughed or inactive workers are reluctant to return to work.

Directors are finding that the most challenging roles to fill are those that call for high-level qualifications; skilled tradespeople are also much in demand. In response to these shortages, 81% of directors would support loosening immigration requirements as a way of easing the pressures on the labour market.

Labour shortages are also impacting on the salary costs facing business. Three-quarters of directors say they are concerned by this. Half of those affected are observing increases in wage costs in excess of 5%.

The IoD is calling on the government to increase its efforts to train workers, facilitate the issuance of working visas and reduce the costs of employment. Its proposals include:

  • Extend the Kickstart Scheme beyond 2021, and invest in the Knowledge Transfer Partnership scheme to allow SMEs to access university talent;
  • Suspend the Immigration Skills Charge for small businesses and explore other ways of easing immigration restrictions;
  • Temporarily slash non-wage costs like employers' NICs, for example by raising the employment allowance, for start-ups and the hospitality sector in particular;
  • Encourage investment in training by creating a new temporary tax incentive to support spending on retraining, technology, and green growth, or widen R&D tax reliefs to include these.

Joe Fitzsimons, IoD senior policy advisor, said: "Employers are keen to re-build following an incredibly turbulent 18 months for business. But the issue of labour shortages is proving disruptive across a huge range of sectors and at all levels … Although there is light at the end of the tunnel, with COVID restrictions continuing to ease, businesses are still relying on the government to address the ongoing challenges within the labour market. There are actions the government should take in the immediate term, although they must not neglect the longer-term skills gaps employers are facing."

The latest quarterly Labour Market Outlook from the Chartered Institute of Personnel and Development (CIPD) has found that two in three employers are planning to take on new staff and many plan to upskill staff in a bid to tackle labour shortages.

The survey found that its net employment intentions figure, which measures the difference between the proportion of employers expecting to add jobs and those planning to cut them, has risen for the fourth consecutive quarter. The figure now sits at +32, up from +27 last quarter, marking the strongest employer intentions seen since tracking began in 2012/13.

When asked how employers with hard-to-fill vacancies will deal with these vacancies, 44% said they would upskill existing staff, 26% said they would hire more apprentices and 23% said they would raise wages.

Written by Rachel Miller.

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