The UK labour market is experiencing an unprecedented shortage of workers, causing supply chain chaos and economic uncertainty. Recruitment for both permanent and temporary jobs is more challenging than it has even been for some industry sectors and the haulage industry is perhaps where this has been most clearly visible.
The Institute for Fiscal Studies (IFS) reports that the food and drink, haulage, care, warehouse and storage, construction, manufacturing and hotels have seen the most significant challenges since the re-opening of the economy following the national restrictions on business operations.
Why has this happened?
The two primary reasons are Brexit and the COVID-19 pandemic. These two seismic events have had a colossal impact on the UK economy. The pandemic caused national and international restrictions on trade and movement and at the same time, Brexit created restrictions on the availability of workers across the economy. These two events happening almost simultaneously has created a shock to the national and global economy.
The rush to re-open post-pandemic has caused bottlenecks in supply chains for goods and services and the worker shortage that has arisen as a consequence, provides further frustration to the economic recovery.
Brexit was always going to create challenges for those industry sectors that relied heavily on migrant workers, but the pandemic has undoubtedly compounded this significantly, making planning and mitigation all the more difficult.
Many businesses have changed business models during the pandemic, including a significant shift to remote working. Those who returned from furlough in the autumn of 2021 needed reintegrating, refreshing and in some cases, upskilling upon their return from many months out of the workplace. Some have not returned, or have elected to change their priorities and work life balance, particularly those put off by working environments notorious for poor pay and conditions.
How has this affected other parts of the economy?
As well as directly through the supply chain, these gaps and strains have caused a ripple effect throughout the economy. There is reluctance to invest, as well as hesitation over budgeting and forecasting. Shortages means an increase in demand, which transfers into increase in costs.
Nine million workers were furloughed at the peak of the pandemic which demonstrates the vulnerability of certain sectors, notably hospitality, tourism and close contact service environments. More than 50% of the total of the air passenger transport workforce was furloughed in 2020/2021 and there have been large scale redundancies throughout the last 18 months.
The Chancellor has reported tax rises in the autumn budget and it is becoming evident to experts that the fiscal landscape is unlikely to recover as quickly as predicted in a post-pandemic, post-Brexit UK economy.
What are the solutions?
- Visas and work permits
While large scale migration neither causes, nor solves labour shortages, it can help with localised or temporary shortages. The granting of visas to international HGV applicants would ensure that the supply chain, particularly for key products such as food, is able to get moving. Expanding the Shortage Occupation List to enable priority work permits to be granted would also help, although nurses remain on that list and NHS England has reported in excess of 90,000 vacancies.
- Improve pay and conditions
It has been widely reported that many HGV drivers received pay rises in the summer and autumn of 2021. Pay alone however, is not enough when the working environment is responsible for a high turnover of staff. Workers will be attracted by safe working environments, adequate breaks, greater flexibility and suitable facilities, which are essential to ensure that suitably skilled workers apply and remain in key jobs.
- Recruit differently
By analysing the methods and channels of recruitment, employers can understand how they can appeal to a wider pool of applicants. Making use of apprenticeships and intern arrangements are alternatives and may come with government subsidies. Anyone with an appropriate drivers’ licence was written to in a recruitment drive for HGV drivers, which may seem a little desperate, but also provides an example of targeting potential applicants differently.
The attributes existing workers have that are valuable, including knowledge of the company culture, loyalty and their skills and experiences, make them worth investing in. They may have transferrable skills to fill the gaps needed for operational recovery across the business. Providing for career development, skills and educational investment will help with retention of ambitious workers.
Recruitment bottlenecks are inevitable as all sectors and businesses actively recruit at the same time. This will take time, but is not a permanent barrier to finding suitable applicants to fill vacancies.
- Working differently
By cutting out unnecessary tasks or touch points, businesses can find more efficient ways to deliver the same output with more limited resources. Investment in automation and greener technologies, or by outsourcing parts of an operation to agencies or companies who have a larger pool of resources, can provide both short and long term solutions to the current shortages.
Is the end in sight?
The landscape is improving. The number of employees on payroll is already back to pre-pandemic levels at just over 29 million. This is despite the number of reported vacancies being around 1 million in August 2021, rising 25% in the previous three months across all sectors. This suggests that employers are actively seeking to recruit and struggling to do so.
Shortages of skills, particularly in low paid jobs, is more open to interpretation as to whether this is a shortage of skills, or of desire to do these jobs. It is arguable that pay and conditions are responsible for the shortages, rather than necessarily a shortage of personnel. This isn’t to say that there has been a dramatic shift of worker power, but the evolution of work represents greater choice for workers.
There is no quick fix. The pandemic has given people a new perspective on flexibility and working remotely. It has changed habits and priorities and the pool from which to recruit has diminished post-Brexit. These events will have a long term, irreversible impact on the UK labour market and businesses will need to adapt if they are going to succeed in a newly shaped, global economy.