The UK labour shortage: what you need to know

8 Jul 24 | Blog

Have you noticed it? The lack of response to your job advertisements, the overstretched teams? For several industries in the UK, the past year has been characterised by labour shortages. In fact, 71% of organisations have said they’ve been affected. But why is this happening? What’s the impact? And how can businesses overcome this challenge?

Labour shortage in UK businesses: which industries?

You might assume it’s the same ‘sort’ of sectors that are affected by labour shortages, but there’s actually several notably different industries who are feeling the pressure. Here’s three which are particularly affected:

Hospitality: restaurants, bars, hotels, events – all of these areas have been hit by labour shortages in the past year. You may well have noticed it if you’ve spent any time in tourist hotspots in the UK, with waiters rushed off their feet and kitchens struggling to keep up with orders. This is due – in part – to the sector’s past reliance on international staff, and waning interest in this sector from UK employees.

IT & Tech: there’s a wide range of specialisms in this sector – and that’s the problem. For an industry that relies on highly technical knowledge of niche topics, like cybersecurity, there’s a labour shortage based on a specific skills gap. They’re short on employees because there simply aren’t enough skilled people available.

Construction: when it comes to this industry, it comes down to similar challenges in recruiting: it’s an ageing talent pool, with a lack of interest in joining the profession from young people in the UK. That means falling employee numbers and, again, a growing skills gap that the sector has to mitigate.

What impact are UK labour shortages having?

What happens when you’re short on employees? Well, let’s take a look. In the best case scenario, it makes your day-to-day activities hard work – if you’ll excuse the pun. Your existing employees are put under strain, which leaves you at risk of losing even more staff, and your output can suffer.

Where the worst case scenario is your business folding, there’s a middle-ground that could lead to that eventuality too. 12% of organisations have reduced in size as a result of the shortage, with 38% unable to expand. For SMEs and mid-market businesses trying to grow, this labour shortage could be the biggest barrier to success – and survival.

What’s driving labour shortages in the UK?

So why is this happening now? As always, there’s no one reason – but there are a few things that are likely to have driven this labour shortage. Let’s explore what they are:

Brexit

Let’s look at the numbers: the UK has lost 300,000 employees as a result of the 2016 referendum. There are multiple industries that heavily relied on international labour prior to Brexit – hospitality, for example – and the new barriers in seeking employment in the UK means that the talent pool has been drastically reduced.

Early retirement

Post-pandemic, employees are retiring earlier and earlier. And that’s before they reach the UK official retirement age – and ONS research shows the majority do so out of choice (rather than medical necessity, for example). That leaves several sectors – like construction – at risk of drawing from a much smaller pool of talent.

Covid-19

The ‘stay at home’ orders brought on by the pandemic meant several industries stopped functioning. People who had worked in restaurants and bars, or in other ‘non-essential’ physically demanding industries, could not go into work. Now, after having to pursue other avenues, some UK-based workers have swapped careers – possibly falling out of love with the long hours, high stress, and limited pay of their previous roles.

Skills gap

As discussed, several sectors are experiencing a skills gap – with 80% of smaller organisations struggling to find staff with the abilities they need. That means the candidates who do have the right skills are going to be in high demand, and SMEs are going to struggle to compete with bigger businesses who can offer an established brand reputation and more impressive compensation.

What can you do to overcome labour shortages?

When you’re faced with external factors – like Brexit or Covid-19 – or industry-specific complications – like a skills gap or ageing workforce – it might seem like there’s not much you can do. But there are at least two things we’d suggest…

1. Look externally: what can you do to make your organisation more attractive to candidates? Are you being transparent about your pay, and is it in line with industry benchmarks? If pay is a tricky area, is there anything else you can focus on in your job advertisements – like increased flexibility?

2. Look internally: if you are seeing a skills gap, can you train and teach any of your existing employees? And of your existing employees, is there a way to take the pressure off, or reward their doubled efforts – i.e. are they at risk of leaving your organisation?

How we can help

Qlearsite is a Talent Intelligence Platform, built for growing UK businesses. What does that mean? It means we’re the only platform to combine your HR data, industry benchmarks and trends, and employee feedback in one place – giving you all the data you need to understand how to attract and retain talent.

If you’ve got a labour shortage, we can help you improve your hiring outcomes – by showing you what compensation you need to offer, and what teams have gaps. If you’re worried about resentment in your overstretched team, we can show you any growing trend towards attrition – and help you identify what exactly is driving that.

It’s fast, easy, and affordable – because talent intelligence isn’t just for enterprises. Learn more…

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