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IoD: Staff shortages could undermine recovery

13 Aug 2021

An IoD survey of over 700 Directors shows that 44% of businesses are currently experiencing staff shortages – a development which risks undermining the recovery and stoking emerging inflationary pressures.

Of those affected, 65% attribute worker shortages to the UK’s long-term skills gap, whilst 4 in 10 are struggling with a lack of potential workers from the EU. Some 21% state that these shortages are due to staff having to isolate. A similar proportion report that furloughed or inactive staff are reluctant to return to the workforce at the current time.  

Directors are finding that the most challenging roles to recruit are in the ‘professionals’ and ‘associate professionals’ categories – although ‘skilled tradespeople’ are also much in demand. The sector worst hit by staff shortages is hospitality.

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%.  

In order to ensure that any recovery is not stymied by a dysfunctional labour market, the IoD calls on the Government to increase its efforts to train workers, facilitate the issuance of working visas and reduce the costs of employment. Our 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, Senior Policy Advisor at the IoD commented: 

“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. Ensuring that workers are available with the right skillset to perform effectively is a crucial pre-requisite for recovery.

The long-term skills gap combined with both a reduced talent pool since leaving the EU, and the immediate impact of the ‘pingdemic’, are the primary pressure points. The resultant rising wage bill is the next bitter pill to swallow. It is understandable that directors are very concerned.  

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.”

Full Survey Results 

 739 respondents, conducted between 23rd July – 11th August  

Thinking about your primary organisation, are you currently experiencing staff shortages?  

Yes, very much so 

10%

Yes, to some extent  

34%

No, we are not experiencing staff shortages 

47%

Not applicable  

9%

Don't know  

0%

  

What type(s) of occupations are you finding it hardest to recruit?  

Managers (junior and middle-level positions) 

20%

Senior managers and executives 

8%

Professionals (e.g. lawyers, accountants, and jobs usually requiring graduate/postgraduate qualifications) 

31%

Associate professional (e.g. science & engineering technicians, nurses and other occupations requiring high-level vocational qualification 

27%

Skilled trades (e.g. electricians, plumbers, motor mechanics) 

26%

Sales, marketing and customer service 

22%

Administrative and secretarial 

15%

Machine operatives 

12%

Low-skilled occupations (e.g. farm workers, cashiers, cleaners) 

16%

Other (please specify) 

10%

We have no difficulties meeting our recruitment needs 

1%

Don't know 

0%

Not applicable 

1%

  

Why do you believe you are currently experiencing staff shortages?  

Staff are being told to self-isolate 

21%

There is a lack of potential employees from the EU 

38%

Unwillingness of furloughed or inactive workers to return to the workforce 

21%

Long term skills shortage in required area 

65%

Other (please specify) 

18%

Don't know 

1%


In order to ease labour shortages, would you support a loosening of immigration requirements?  

Yes – across all categories of worker 

37%

Yes – but only in targeted sectors where there is significant need 

38%

Yes – on a devolved nations basis (allowing devolved nations to make their own immigration decisions) 

6%

No – the current immigration arrangements are satisfactory  

17%

Don't know 

2%

 

Are you currently observing rising wages/salaries, due to staff shortages (above the rate of inflation)?  

Yes increase 26%+ 

1% 

Yes increase 16-25% 

4% 

Yes increase 6-15% 

16% 

Yes increase 1-5% 

18% 

No 

45% 

Not applicable  

13% 

Don't know 

2% 


How concerned are you about increases in your salary related business costs?  

Very concerned 

18% 

Concerned 

55% 

Not very concerned 

25% 

Not concerned at all 

2% 

Don't know 

0% 


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