We face a perfect storm of staff shortages

In a speech to the Recruitment and Employment Confederation’s (REC) Annual Conference, Lord Bilimoria identified several factors behind current labour market shortages – ranging from the paradoxical effects of the job retention scheme to EU workers not returning to the UK amid the COVID crisis.

He highlighted the importance of training, reforming the Apprenticeship Levy, and creating new technical education routes into careers. But he also called on the government to update the shotage occupation lists for roles including butchers, bricklayers and welders.

He added that action is needed now to bolster the UK’s competitiveness and growth potential. An adequate supply of staff is critical for securing the UK’s recovery.

Transcript

Good morning everyone. And thank you, Neil for that kind introduction.

The REC is a brilliant organisation – we’re so proud to have you in CBI membership.

The recruitment industry plays a vital role in our national life.

You help to place over a million people in employment, who, in turn, add around £86bn to our economy each year.

Even better – you also increase productivity. Worth a further £8bn every year.

And your expertise and insight will be essential as we rebuild from the pandemic to get our economy going again, to support people as they go back to work… and to help those who may have lost their job to find a new one.

But while these next few months will be crucial to our recovery, we also need to be turning our eyes to the future.

And the very real, long-term challenges your industry faced – even before this pandemic – in matching businesses with the talent they need.

So, today, I want to look back at a few lessons of the past year and how we might together – learn from them, forging a path to success in the decade to come.

The very best of business

Let me start, with where we are now.

The COVID-19 pandemic has affected everyone, everywhere. It’s been a health crisis. An economic crisis. A demand shock. A supply shock.

With a domino effect, reverberating around the world.

And, across the country, we’ve seen firms innovating in truly extraordinary ways. Whether that’s creating new products and services, going digital for the first time, or pulling out all the stops, to make workplaces covid-secure.

In fact, a CBI survey last November found that two thirds of employees believe businesses have done a good job in ensuring employee safety during the pandemic.

And here in recruitment – your industry has had one of its toughest years in a generation.

But you’ve showed incredible agility – from the moment lockdown first hit. Recruiting key workers, and helping those who’d lost their jobs get back into work.

So perhaps the greatest lesson – during the crisis, and as we rebuild is partnership.

Businesses partnering with government – to keep the economy going. Recruiters partnering with clients – to prepare for the unknown.

And there’s perhaps no better example than the global partnership to deliver covid vaccines.

To think that the earlier record for vaccine development was four years and last year we did it in a matter of months. A triumph of science, universities, business, and government – together.

And proof of what’s possible when every part of society works towards a common goal.

Now, we need to bring that same spirit of unity to our recovery.

The challenge ahead

And as we emerge from the pandemic, your expertise, in recruitment, will be vital.

Particularly because – right now – we’ve got a big problem.

We know, as the weeks go by more and more businesses are re-opening. It’s fantastic. And a sign of light at the end of the tunnel.

But as lockdown restrictions lift, we’re also seeing a surge in the demand for labour – and we know many businesses are already struggling to recruit.

In fact, the latest report from the REC and KPMG showed overall candidate availability during the past quarter declined at its quickest rate since 2017.

It’s a big challenge. Not just for individual businesses, who can’t find the people they need. But also for our longer-term economic recovery.

It’s like restarting a car, after winter. If we stall now – at the very beginning – it will take us that much longer to get the engine going, and get back to the road.

So what’s happening?

Well we’ve got a perfect storm of factors coalescing.

During the pandemic, we know many workers from overseas left the UK – to return home – hitting the UK’s hospitality, logistics, and food processing industries particularly hard.

The UK’s immigration system is also a barrier to hiring people from overseas to replace those who may have left.

Meanwhile Covid has, of course, added major uncertainty. With some sectors locked down longer than others, many experienced workers have moved to businesses that stayed open.

Other people are understandably wary of changing jobs right now, while the future is unclear.

And the furlough scheme ─ a lifeline, for millions of employers and employees alike is now becoming a strange paradox for policymakers.

We know that – for months – businesses have been paying to keep their staff on furlough. It’s a promising sign that they want their workers to have jobs to return to.

But the paradox is this: the more successful the Job Retention Scheme is – and it has been very successful so far – the smaller the talent pool for businesses, here and now.

And together, all these factors pose a problem.

Whether that’s in hospitality, where the shortage of chefs – already an issue pre-pandemic – is now even more acute, leaving thousands of vacancies unfilled.

Or transport. Where one workwear supplier in the North West told us they used to get 20-30 applications for HGV driver positions prior to the pandemic. But are now averaging fewer than ten applications per post.

Or in food and drink. Where a leading food supplier told us they’ve seen EU workers leaving during the pandemic and despite offering apprenticeships, they can’t attract new workers to fill the gaps.

And of course – on top of all this, the UK’s longstanding skills shortages haven’t gone away.

Stepping up

So, the stakes are high.

Business and government need to act – fast – if we’re to get our recovery off to the best possible start this year.

We can’t risk being first on vaccines – a huge effort to make this country safe – only to squander this potential, with businesses unable to get going because they can’t fill roles.

There are, of course, things employers can do – themselves – to tackle staff shortages.

To mention just three: As a starting point – we can open up new routes into business. Whether it’s a new apprentice scheme, a traineeship, a kickstart placement, or higher technical qualifications.

The accounting industry is a great example. At the CBI, we’ve heard from accountancy firms who now hire more school leavers than graduates. Investing in young people as a new talent pipeline.

And since Covid – we know so many firms have innovated. Like law firm, Eversheds Sutherland, who introduced a virtual shadowing scheme during lockdown to make sure junior lawyers could still access training and opportunities while working remotely.

Second – businesses can tackle some shortages by investing in innovation and technology. One family horticultural company near Cambridge – who supply national supermarkets – told us they’ve recently struggled to find the people they need on their farms, particularly in seasonal work and lower-paid jobs.

So they invested in new machinery – and can now automate processes – like harvesting lettuce and celery – while still preserving valuable roles for apprentices, specialists, and training in farm management.

Third – employers can look to recruit from a wider talent pool. Working with organisations and charities – like Mind, Business in the Community, Movement to Work, or DisabilitySmart. Considering those who might otherwise be overlooked in the world of business – based on their gender, ethnicity, or background.

Or supporting the CBI’s own campaign – ‘Change the Race Ratio’ – to increase ethnic minority inclusion across business. It’s a project we launched last year. And it’s been amazing to see the momentum – with almost 100 leading employers signed up so far, and counting.

I know Neil has just signed the REC up – it’s fantastic news, and shows real business leadership.

And the campaign’s ultimate goal is both helping firms find the talent they need, from all corners of life, and making society that bit fairer.

I encourage you all to sign up.

Policy ideas

So those are three big things companies can do.

But the scale of this challenge – and the current labour shortage, right now, also demands government action.

Policymakers need to respond now.

By autumn it will be too late.

And, at the CBI, we’ve identified two big things the UK government can do straight away, with no regrets, to help make sure the UK is open for business, and to get our economic recovery on the right track.

First – we need government to immediately update the ‘Shortage Occupation List’.

Last year – in September 2020 – the Migration Advisory Committee recommended that we add certain roles to that list. Butchers, bricklayers, and welders for example.

And today, almost a year on, we worry those are exactly the same sectors facing shortages now.

Businesses would also welcome a commitment to review the list annually to keep it responsive to the ebb and flow of skill demands across the whole of the UK’s economy.

But we need an immediate response too.

It’s a simple policy fix – government could do it tomorrow and it would quickly have an impact.

And what’s more – where there are clear, evidenced labour shortages – businesses should be able to hire from overseas. Including jobs that aren’t highly skilled, but have good salaries.

An evolved Shortage Occupations List could help.

But workers from overseas aren’t – and shouldn’t be – our only response to staff shortages. Investing in skills here, too, is vital.

And right now, government policies don’t always help people gain the skills that are most needed. Making it more likely that businesses will need to keep hiring from overseas.

So the second step – is to align our immigration and skills policies. By using the Lifetime Skills Guarantee and the National Skills Fund to help people here gain the skills for those jobs on the Shortage Occupations List.

Doing more to support British workers and directing them to qualifications we know are in short supply.

Together, these measures could begin to ease the most immediate shortages holding firms back.

And of course – as REC members know better than anyone, there are longer-term problems to solve too.

Like the apprenticeship levy.

For too many businesses, the levy – in its current form – is a barrier to training investment, rather than an incentive.

At the CBI we’d like to see it transformed into a ‘Lifelong Learning’ Levy. Helping companies fund the training they need – like short-courses, and product training – with a system that works for the modern economy.

And, as we emerge from lockdown we also need to be supporting young people.

The government’s ‘kickstart’ scheme is a brilliant idea – aiming to create jobs for 16 to 24-year-olds, at risk of long-term unemployment.

But with delays to re-opening our economy, and to guarantee time to process the huge demand for placements, the CBI is pushing to extend the Kickstart deadline until June 2022.

Ultimately, each of these levers – the immigration system, the skills system, the apprenticeship levy, the kickstart scheme, all play a part in getting our economy on the right track.

And if we get it right today – we’ll lay the groundwork for the UK to compete internationally, in the decade to come.

Seize the moment

So those are some immediate priorities.

But, looking to the months and years ahead. As we know, our economy is changing rapidly.

This year – 2021 – we have a new relationship with the EU. A global pandemic. A tech surge. And we’re months away from COP26.

Meanwhile the government is investing huge amounts in our economy – funding infrastructure and innovation.

And we’ll never have a greater opportunity to transform our economy and society, for the better, than right now.

This is our chance.

So last month, the CBI launched an economic strategy for the UK. It’s called: Seize the Moment.

It builds on months of discussions with business and detailed research. And identifies six big opportunities: From decarbonising the economy to win the global race to net-zero; to an innovation economy with breakthrough ideas and technologies; to a regionally thriving economy in which every region and nation plays to its comparative strengths; to a globalised economy, making the UK a trading powerhouse; to a healthier nation in which employee health and wellbeing is the foundation of productivity.

And finally, an inclusive economy – where employers recruit more diverse talent from all corners of society, and support people to progress. Helping people to get jobs, change jobs, gain new skills, and ultimately improve lives. All of which will only be possible with you – the UK’s great recruiters and employment specialists.

Conclusion

So, in conclusion, if I think back, to one year ago – at the height of the Covid crisis, we were so worried about unemployment.

Before the pandemic, unemployment was under 4%. One of the lowest rates since the 1970s.

We thought we might be in for a repeat of the financial crisis – when unemployment went up to over 8%. And we were worried that we would have so many people without jobs – and no vacancies.

But now – a year on – we actually have more vacancies than before the pandemic.

In some ways, it’s a good problem to have. And I never thought – as we come out the other side – I’d be giving a speech about staff shortages.

Now we need to keep an eye on the furlough scheme – let’s see what happens as it gradually winds down.

And in the meantime – let’s take those ‘no regrets’ actions I’ve outlined – business and government, together, to solve this shortage, and unleash what Andy Haldane described as 'the coiled spring' of the UK economy.

If we do, I have every confidence this could be the best decade yet for the UK economy.

To every REC member I say – it’s your expertise that will make this a reality. And the CBI stands ready to work with you.

Now let’s get started.

Thank you.