Skills shortages, Brexit and pay data

The latest Labour Market Outlook (LMO) from the CIPD provides some interesting insights into the predicted effect of Brexit on the labour market and employers’ intentions regarding pay awards.

Skills shortages are ‘starting to bite’ in UK sectors that employ a high number of EU nationals says the CIPD. Official ONS data and the LMO suggest that a fall in the supply of EU nationals may be playing a key role. The official data (ONS: Jan 2017) show that low-skilled sectors that typically employ many non-UK nationals from the EU are facing particular recruitment challenges with vacancies in retail and wholesale, manufacturing, health and accommodation, and food services making up almost half (45%) of all vacancies.

According to the LMO research, the most common response to labour shortages has been to leave the positions empty, ‘reflecting the tightness of the domestic labour market and tentative signs that the UK is attracting and retaining fewer EU nationals’. The report also shows that as many as one in four employers (27%) have seen evidence to suggest that non-UK nationals from the EU were considering leaving their organisation and/or the UK in 2017. This is most evident in the public sector, with 43% of education and 49% of healthcare sector employers surveyed saying they believed EU migrants among their workforce were considering leaving their organisation and/or the UK in 2017.

As to how employers plan to respond to migration restrictions, a quarter (26%) said they would ‘pay the difference’ and absorb the extra cost of recruiting EU nationals, whilst others said they would seek to retain older workers (19%), invest more in training and up-skilling (17%), recruit more apprentices (17%) and look for UK-born graduates (16%).

Pay is not being pushed up significantly, despite the challenges with labour shortages. The LMO says that median basic pay expectations for the 12 months to December 2017 stand at 1.5%. The chief reason for this is increasing inflation, along with the National Living Wage. Pay expectations are highest in manufacturing and production (2%) and services (2%) and lower in the public sector (1%).

The full LMO report can be found here: https://www.cipd.co.uk/knowledge/work/trends/labour-market-outlook