Worker shortages hamper UK productivity as unemployment falls to lowest level in fifty years

Tue 11 Oct 2022
Posted by: Phillip Adnett
Trade News

UK Unemployment and business productivity

Three quarters of UK companies have been affected by labour shortages in the past year, reducing their productivity and growth.

An employment survey by recruiter Pertemps and the CBI, reported in the Times, found that almost half (46%) of firms have experienced shortages and were unable to meet output demands.

This comes as UK unemployment fell to its lowest level since 1974, according to fresh data from the Office for National Statistics (ONS).

Government support

Half of the companies questioned said they want the government to introduce incentives to help them invest in technology and automation to boost productivity. A similar proportion (44%) want temporary visas granted for roles where there are acute shortages.

Marco Forgione, the director general of the Institute of Export & International Trade (IOE&IT), endorsed the call for the government to support investment in productivity-boosting technologies, but also said a drive to improve key skills is needed.

He said:

“UK employment figures continue to be strong, but there’s no doubt there’s been labour shortages in certain sectors following Brexit.

“There’s clearly a need to improve efficiencies by investing in new technologies, but we also need to ensure we have the right skills in this country for the jobs that need doing.

“Rishi Sunak last year announced a £3bn ‘skills revolution’ when he was chancellor, which included funding for adult skills training and apprenticeships. We would hope to see this backing of the UK workforce replicated by the new chancellor Kwasi Kwarteng.

“This includes encouraging more people to look at training in the international trade sector. Boosting UK exports is fundamental to rebooting the economy. It is therefore vital that the government supports people to get access to the skills and training needed to trade successfully.”

Enforced changes

More than a third (36%) of businesses affected by labour shortages have made changes to or reduced the products or services they offer, while 26% reduced planned investment, reports the Evening Standard.

Seventy per cent said access to labour would remain a threat to competitiveness in five years’ time.

About 56% of companies are increasing salaries to try and retain staff, while 55% are investing in upskilling.

Prime minister Liz Truss has promised to tackle shortages with immigration rules set to be relaxed to boost business growth.

Unemployment low

ONS figures today show that the unemployment rate fell to 3.5% over the three months to August – its lowest since February 1974, reports City AM.

However, there was also a record rise in the number of people considered “economically inactive” due to long-term sickness.

According to Bloomberg, economists expect a gradual easing of the labour market, with vacancies down by 46,000 in the third quarter, the biggest drop in more than two years.