INDUSTRY ANALYSIS - WHAT'S CAUSING THE UK'S CANDIDATE SHORTAGE?
Posted on 10th May 2022
We recently asked for your views on what you believe has most directly lead to the UK's candidate shortage. After reading your insights into the current job's market and wider economy, we wanted to highlight some of the latest industry findings that are collectively shaping such a highly competitive hiring landscape.
We believe that the explanation behind the current situation is strangely both simple and complex. The straightforward explanation is one of basic supply and demand - with demand for talent across the economy far outreaching the supply of suitable, talented candidates. The underlying reasons for this mis-match in supply and demand is where the exploration grows more complex, incorporating a web of intertwined factors that tie into major recent global events as well as more general underlying long-term trends.
CORONAVIRUS
The impact that the Coronavirus pandemic has had on the economy and jobs market has been enormous and has led to demand and supply issues around talent shortage that the economy now faces.
As lockdown restriction were initially lifted and business able to return to normality, the economy faced an overwhelming cumulative surge in hiring activity. This bottle-neck was simply created by too much activity happening in too short a period of time - overloading the demand for talented candidates. As one source comments "On the demand side, the re-opening of the economy as the pandemic loosens its grip has meant stronger competition for staff"(1).
But how has the pandemic affected the supply of candidates? Well, one interesting trend attributed to the pandemic saw many people moving toward economic inactivity, leaving the jobs market altogether. "To date, the pandemic has had more of an impact on the labour market status of particular age groups. Workers aged 18-24 and 65+ have been most likely to leave employment"(2). "According to official figures, the employment rate for 50-64-year-olds has dropped by almost 2 percentage points to 70.8% since COVID-19 hit, reversing a global mega-trend for more older people to join or stay in the workforce. Even the 2008 financial crisis barely affected this trend."(3)
The pandemic may have also reduced many people's desire to jump ship to new employers. While the feeling of economic uncertainly during the height of the pandemic may have discouraged people seeking new opportunities, employees may now find themselves in strong positions to negotiate higher salaries and other benefits from their current employers.
BREXIT
Generally speaking, the impact of Brexit on the supply of candidates has arguably been more relevant to certain industries over others. Agriculture, horticulture, hospitality, meat & dairy, and social care are some of the core industries believed to have been most adversely affected by the reduction in the EU workers. "Although the coronavirus pandemic has had a major impact, sectors which relied on the freedom of movement of EU workers before Brexit appear to have suffered the most."(4) As another source comments "Brexit combined with COVID-19 has meant a significant reduction in overseas workers coming to the UK, leading to acute shortages in more manual roles in areas like supply chain, retail and agriculture.(5)" Additional industries and areas of expertise have also been highlighted as susceptible to the impact of Brexit "For those that previously relied on EU workers to fill lower-paid jobs, such as cleaning, social care, distribution, childcare, food and hospitality, that is likely to mean an increased reliance on domestic candidates. This could be problematic in some cases"(6).
FLEXIBLE WORKING
The pandemic led to a huge reliance on remote working - primarily out of necessity. However, this change seems to have permanently altered the recruitment market with vast numbers now seeking to continue with flexible, hybrid or remote working from their current employer or placing a strong value on this when looking for a new role. Employers that fail to offer or explore such benefits when advertising new roles seem to be putting themselves at a disadvantage in such a competitive hiring environment.
Recent research has shown just how many businesses are failing to fully incorporate truly flexible working into their latest hiring activities, "Nearly three-quarters of job vacancies are still failing to offer flexible working, research has found, despite the wholesale changes to working practices caused by the pandemic over the last two years"(7).
Various studies have also shown that many employees are willing to 'vote with their feet' when it comes to this issue. One source highlights a record number of employment tribunals over flexible working, "The number of Employment Tribunal decisions relating to flexible working has increased by 52 per cent to reach a record high of 193 in the past year, up from 127 in 2019-20"(8). An additional source highlights that many seem to be willing to quit their current roles if their employers fail to offer an adequate level of flexibility "Across all sectors, around half of employees could quit if denied the flexibility they want, especially as over 40% feel they are more productive working remotely than in an office.(9)"
BUT WAIT, THERE'S MORE
To complicate things further, there are also a range of other factors that are perhaps not reported quite as prominently as the other key issues.
One factor relates to the general state of skills investment within the UK. While not directly tying into the Coronavirus pandemic or Brexit, this trend coincides with these other developments to to provide an additional challenge. "(Stephen) Evans, (chief executive of think tank the Learning and Work Institute) argues that more needs to be done to tackle Britain's chronic skills deficit, noting that while the government is increasing spending on adult skills, it will still be investing less in 2025 than it was in 2010"(10).
In addition, while many older workers seem to have removed themselves from the jobs market during the course of the pandemic, a significant number will also simply be leaving the workforce due to general retirement as the UK finds itself with an increasingly older population. "The older population in the UK is projected to grow, with people aged 65 and over making up 24% of the population by 2043 (17.4 million people)"(11).
At the other end of the spectrum, it has been reported that young people are also now tending to spend longer in education "Another reason for the drop (people in the workforce) is that young people are spending longer in education".
FORGING AHEAD
While the current economic backdrop is certainly challenging for finding talented and available candidates, it's important to remember that successful hiring activity across the economy is still vast.
As the office for National Statistics highlight "September to November 2021 estimates showed a continuing recovery in the labour market, with an increase in the employment rate and a decrease in the unemployment rate compared with the previous three-month period" (12). The Recruitment and Employment Confederation also commented "Permanent placements rose at a sharper rate than in October, the fifth-quickest on record, and one that continued to outpace that seen for temp billings"(13).
In additional, while the marketing conditions are competitive, there are still various steps that can be taken to gain an advantage over competitors in the marketplace in attracting the best talent. Our previous top ten tips explored some of our best strategies to boost your success rate and on the next page we'll re-summarise these key points.
HIRING TIPS FOR A COMPETITIVE LANDSCAPE
1. CREATE AN 'EMPLOYER BRAND'
Finding anything is much easier when it's also trying to make its way to you! While searching for the ideal candidate, it's vital to create an 'employer brand' that'll attract the best talent.
2. LOOK FAR AFIELD
Businesses that have embraced hybrid working have benefitted from an increased range of potential candidates. Consider what hybrid-working ratio you'd be willing to offer to find your perfect employee.
3. DO YOU NEED A TEAM?
One reason that ideal candidates may be tricky to find is that you might need to be looking for a team. For example, do you need a top-tier sales professional or 2 junior sales positions, each focussing on different areas?
4. GET THE BEST PEOPLE LOOKING
Finding that next talented employee needs an experienced team with expert knowledge of your industry, job role, locality and the shifting dynamics of the local market.
5. KNOW WHAT YOU'RE AFTER
Have an accurate idea as to what you're looking for. Drill into the detail for qualifications required, software experience needed, previous positions held etc. However, it's also important to avoid being too specific in areas not fully relevant.
6. KNOW YOUR 'MUST-HAVES'
Avoid deluge of applications from unsuitable candidates. If there are certain requirements that are 'must-haves', then make that clear in any job advertisements.
7. GIVE YOURSELF ENOUGH TIME
Work backwards from your ideal start date and give yourself a comfortable timeframe in which to uncover that hidden gem. By being generous with your timeline, you will unlock numerous benefits.
8. DON'T LOSE IT ONCE YOU FIND IT
There are various factors that could discourage a great candidate from working for your business. This could include too many interview rounds, interview tasks that go beyond the reach of the role and leaving candidates feeling vague and confused.
9. ONCE YOU'VE GOT IT, KEEP IT!
The objective should be to ensure that the company culture and operational processes are aligned to be appealing to the best talent and for this to be a permanent approach.
10. HAVE A BACK-UP PLAN
The time it takes to find that ideal candidate doesn't need to marked by a full absence of that role. Think about what temporary employment options could suit your business.
1. https://www.theguardian.com/business/2022/feb/12/its-not-quite-the-black-death-but-worker-shortage-hits-uk-firms-hard
2. https://commonslibrary.parliament.uk/research-briefings/cbp-8898/
3 . https://www.theguardian.com/business/2022/feb/12/its-not-quite-the-black-death-but-worker-shortage-hits-uk-firms-hard.
4. https://www.euronews.com/2021/12/30/a-year-since-brexit-how-bad-are-the-uk-s-labour-shortages-now
5. https://home.kpmg/uk/en/home/insights/2021/09/ec-beating-the-talent-shortage--do-you-need-to-do-something-diff.html
6. https://www.fenews.co.uk/fe-voices/brexit-a-double-edged-sword-for-the-uk-labour-market/
7. https://www.peoplemanagement.co.uk/article/1745184/three-quarters-job-adverts-fail-mention-flexible-working-research-finds
8. https://www.cityam.com/record-number-of-employees-taking-employers-to-court-for-refusing-flexible-working-requests/
9. https://recruiternews.charityjob.co.uk/whats-driving-the-candidate-shortage/
10. https://www.theguardian.com/business/2022/feb/12/its-not-quite-the-black-death-but-worker-shortage-hits-uk-firms-hard
11. https://commonslibrary.parliament.uk/research-briefings/cbp-9239/
12. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/employmentintheuk/january2022
13. https://www.rec.uk.com/our-view/news/press-releases/report-jobs-permanent-placements-rise-sharper-rate-november
