finance

Three quarters of UK businesses concerned about labour shortage impact – CBI



The UK’s jobs outlook is strengthening, with a net balance of 50% of firms expecting to grow their workforce in the next year.

However, more than three quarters (76%) of businesses are reporting access to labour as a threat to the UK’s labour market competitiveness – the highest proportion since the question was first asked in 2016.

That’s according to the CBI and Pertemps Network annual survey – in its 24th year and with 422 responses.

The research also revealed that 87% of businesses are planning to recruit permanent roles this year, with nearly half of firms (46%) expecting higher levels of recruitment and only 9% expecting lower levels of recruitment for such roles compared to the past year.

Access to skills – noted by 77% of companies – and the ability to move UK workers across the EU – 69% of companies – also feature heavily in businesses’ list of current concerns.

Asked for their top three factors vital to labour market competitiveness, 89% said finding enough people with the right skills, followed by a flexible labour market (47%) and a healthy workforce (35%).

As employees return, businesses are expecting changed working patterns to stay. Compared to working pre-pandemic, more than three quarters (76%) expect the use of hybrid working to increase, 40% expect full time remote working to increase, and 58% expect informal flexibility to increase in their organisation.

Matthew Fell, CBI chief policy director, said: “While firms have been stepping up to address labour shortages through further investment and training, these steps take time and do little to ease the pressure firms are facing now.

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“From logistics to hospitality, firms are feeling strain across the whole economy, and expect this to continue not just for two months but two years.

“Immediately reviewing and updating the Shortage Occupation List so that firms can temporarily fill the most significant vacancies would provide businesses with some breathing room – in the longer-term, skills policies should help workers gain the abilities needed to fill shortages.”

More businesses expect to match or exceed inflation at their next pay review, but almost half of firms (47%) believe labour costs are impacting labour market competitiveness.

Nearly one in four businesses (24%) expect to increase pay above inflation and 44% of firms plan to increase pay in line with inflation, up from 29% in 2020.

Just 8% of businesses are planning to freeze pay, down from 33% in 2020. However, the proportion of businesses that believe that labour costs are impacting labour market competitiveness has increased from 34% in 2020 to 47%.

Similarly, most respondents affected by the National Living Wage (NLW) believe the Low Pay Commission should take the cautious approach of matching inflation next year (56%), while 12% have asked to freeze the rate.

Matthew Percival, CBI director of skills and inclusion, said: “Pay rises need to be underpinned by productivity or risk being passed on to customers through higher prices.

“Businesses are committed to raising living standards and think the Low Pay Commission should protect the real terms value of the minimum wage rather than recommend unstainable larger increases.”

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