‘Supply shock’ hits employers as EU workers stop coming to the UK

Recruitment Services


Recruitment pressures are building on employers and is exacerbated by a ‘supply shock’ of far fewer EU nationals coming into the UK, according to the Chartered Institute for Professional Development’s latest quarterly Labour Market Outlook.

According to the latest official data, the number of EU-born workers in the UK increased by just 7,000 between early 2017 and early 2018, compared with an increase of 148,000 in 2016/17. This represents a fall of 95%. The CIPD says this has fed into a tightening of the labour market, which is being seen through skills and labour shortages being reported by employers:

  • Employers received an average (median) of 20 applicants for the last low-skilled vacancy they tried to fill, compared with 24 candidates in summer 2017 and 25 candidates in autumn 2015.
  • On average, employers received an average (median) of ten applicants for the last medium-skill vacancy they tried to fill, compared to 19 applicants in summer 2017 and 15 applicants in autumn 2015.
  • Employers received a median number of six applicants for the for the last high-skilled vacancy they tried to fill, compared with eight applicants in summer 2017 and eight applicants in autumn 2015
  • Among employers who currently have vacancies, two thirds (66%) report that at least some of their vacancies are proving hard-to-fill, higher than in Spring 2018 (61%) and Spring 2017 (56%).  Organisations with hard-to-fill vacancies report that the density of hard-to-fill vacancies is higher now (40%) in their organisation now compared with three months ago (30%)
  • Two in five employers (40%) report that it has become more difficult to fill vacancies over the past 12 months, owing to a combination of fewer applicants and less suitable applicants in broadly equal measure

The CIPD says that, while demand for labour is continuing, median basic pay expectations in the 12 months to June 2019 remain at just 2%, and mean basic pay expectations have only risen slightly, from 2.1% to 2.2% in the last three months. However, half of organisations (53%) that have experienced increased difficulty recruiting staff during the past 12 months have increased starting salaries in response. A quarter (24%) have done so for the majority of vacancies, and a further quarter (28%) have done so for a minority of vacancies, says the CIPD.

Retention Issues

Among organisations that have experienced increased difficulty retaining staff over the past 12 months, just over half (55%) have increased salaries, with 30% raising salaries for the majority of staff and 25% doing so for key staff only. More than four in 10 employers (42%) have not raised salaries at all in response to rising retention difficulties, highlighting the wider productivity challenges and cost pressures facing many organisations.

The CIPD is pointing to the UK’s continued productivity crisis as a key factor behind employers’ inability to raise wages across the workforce. Gerwyn Davies, senior labour market analyst for the CIPD, the professional body for HR and people development, said: “The most recent official data shows that there has been a significant slowdown in the number of EU nationals coming to work in the UK over the past year. This is feeding into increasing recruitment and retention challenges, particularly for employers in sectors that have historically relied on non-UK labour to fill roles and which are particularly vulnerable to the prospect of future changes to immigration policy for EU migrants. With skills and labour shortages set to worsen further against the backdrop of rising talk of a ‘no deal’ outcome with the EU, the need for the Government to issue consistent, categorical assurances about the status of current and future EU citizens, whatever the outcome of the negotiations, is more important now than ever.”

He added: “Despite the declining unemployment rate, it seems that the downward pressure of persistently weak productivity growth is dominating any upward pressure on pay from labour and skills shortages. The battle for productivity growth and higher wages in the UK will be won or lost in our workplaces. Poor skills development, skills mismatches, lack of worker autonomy and inadequate management all have a significant impact on people’s productivity at work, which affects organisational performance and employers’ ability to increase wages. To help address this ongoing challenge, the Government needs to ensure its Industrial Strategy has a much greater emphasis on supporting improvements in leadership, people management capability and skills development, particularly through the provision of better support for small businesses at a sector and local level.”

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