The UK Labour Market

The UK labour market, much like other advanced economies, is tighter now than it has been in the past 20 years.

Whilst many suggest that the pandemic is responsible for this, this period of unprecedented disruption hasn’t been a major factor. Rather, the problem lies with the ageing workforce and lack of quality training going as far back as the 1980s.

Whilst the UK government grapples with the challenge of invigorating our economy and securing growth, the challenge that the labour shortage raises is an estimated loss of up to 1.5% GDP in 2023, a crippling blow to the economic recovery so desperately needed.

Growth expectation of both companies and government has been low. And yet, even with low targets, achievements may fall short as business struggles to expand its workforce.

Tight job markets create inflated wages but this in turn pushes up inflation and puts stress on company bottom line, particularly small firms working to tight margins and squeezed cashflows. This is of particular concern when companies are turning away orders due to a lack of capacity to fulfil.

So, what to do?

Business and government need to de-politicise the challenge and work cohesively to address the needs of the UK.

1.) Focus on skilling and re-skilling, looking to attract talent from unconventional sources and offer more flexibility where suitable.
2.) Shape retirement policies to be attractive to people considering working beyond state retirement age.
3.) Improve and develop visa schemes to genuinely contribute to growth potential rather than simply being used to plug gaps.
4.) Review our asylum policies and consider work options for people being processed through our asylum system.
5.)Consider investment in labour supporting or replacing AI and automation to create productivity opportunities.

Post-pandemic and Brexit GDP grew steadily, recovering from the 2008 global financial crash. It has since stagnated, and under-investment has exasperated the problem. The new Labour government will need to address this and urgently: just talking about economic growth will prove nothing more than words and the country may decline further.

Let’s hope we make brave and intelligent decisions moving forward.

To discuss this further with Richard East, get in touch here.