Skills shortage preventing businesses from taking on work

Matthew Fryer, Brookson

The skills shortage is continuing to take its toll in the UK, according to new research from the Recruitment and Employment Confederation (REC).

Its latest JobsOutlook revealed that a growing number of firms could have to turn down new business if they cannot source the talent they need.

Indeed, many companies would need to create new jobs to ensure they had the capacity for additional projects. However, with a lack of suitable candidates, growth prospects look somewhat bleak.

The REC found that 31 per cent of business have no spare capacity and would need to hire new staff if work increased.

An additional 54 per cent claim they would only have "a little capacity" in the event of new business and might have to take on additional staff if demand increases.

This is a serious cause for concern for businesses and temporary and permanent employers.

Kate Shoesmith, REC head of policy, said: "Employers’ inability to improve their workforce productivity without hiring new staff is likely to supress pay growth in the foreseeable future as they invest in increasing headcount rather than pay packets. Starting salaries and hourly pay rates will rise in certain areas where skilled candidates are scarce and companies have to compete for talent."

A lack of skills in technical and engineering is one of the biggest worries for employers, with shortages noted in both temporary and permanent hires.

Computing and IT, and education and training are the areas where employers are also finding the most difficulty sourcing permanent employees, indicating contractors are stepping into the breach to plug the gap.

However, there is a shortage of driving and distribution and professional and managerial skills for those thinking about temporary roles.

"The shortage of candidates with the skills required for a growing number of vacancies is a looming problem. Politicians and business leaders need to work together to find solutions to the mismatch between what employers need and what jobseekers have to offer," Ms Shoesmith said.

"Training for young people, world class careers advice and a supportive immigration policy are three areas where immediate action is needed to ensure UK businesses can compete in the world economy."

There is certainly an appetite for hiring at the moment in the UK, with 21 per cent of employers telling the REC that they increased their headcount over the previous 12 months. This is up from just four per cent in 2009.

Only 12 per cent recorded redundancies in the past year, down from 22 per cent in 2009.

Consequently, there is increased optimism among employers. When asked about when they expect conditions to improve for their business, 49 per cent claimed that things were already ok and no advancement was needed. A further 26 per cent said that things were beginning to pick up.

The release of the REC's JobsOutlook coincides with news from PwC and the Confederation of British Industry that hiring is increasing in the financial services sector.

Indeed, with business volumes and revenues travelling upwards, companies are now looking to grow their workforce, with employment growing at its fastest pace since 2007.

Matthew Fryer Brookson

I am a chartered tax advisor with a specialism in the freelance contractor sector advising contractors on how to structure their affairs and recruitment businesses and end hirers on the effective…