We need a systemic response, not a sticking plaster, to solve labour shortages

Responding to comments by Business Secretary Kwasi Kwarteng about labour shortages being due to the UK transitioning away from “the low-wage, high-immigration model”, Kitty Ussher, Chief Economist at the Institute of Directors, said:

“The labour shortages we are seeing are not only in the low wage sectors. More of our members report shortages amongst managers, professions and skilled workers than in the sectors that are traditionally lower paid. What’s more, around two thirds of our members who report shortages say that this is because of long-term skill shortages; a higher proportion than those who attribute the cause to a lack of employees from the EU or factors related to the pandemic. What appears to be happening is that as the economy readjusts and reopens, some fundamental weaknesses are being exposed that are compounded by the shorter-term issues.

“It follows that we need a systemic response from government, not a sticking plaster. Now is the time to re-engineer our economy and incentivise upskilling and reskilling so that everyone – at whatever level and whatever their employment status – is supported to meet the new requirements of our economy. We want to see investment in human capital included in investment tax reliefs for business, lifelong personalised training budgets for individuals, and tax incentives for sole traders to retrain. We also need to reinvigorate the sector skills councils to ensure that accredited training is available to support everyone at all levels to progress to the next stage. What we certainly don’t need at this time is government raising the cost of employing someone through a rise in employers’ national insurance contributions.”

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