Sophie Williams has a problem: she cannot find the 45 staff needed to ramp up production at her steel coatings business in Telford in Britain’s industrial heartland.
This is not the situation in which Williams, the general manager of the 160-year-old Corbetts The Galvanizers, expected to find herself. A year ago, concerns were more about 1980s-style unemployment caused by the pandemic tearing through the West Midlands and other parts of Britain. Now, said Williams, 36: “The biggest challenge is people.”
It is a complaint repeated across the country — from a shortage of workers for manufacturers, to lorry drivers to waiting staff at restaurants. And it is a paradox that has left bosses and economists confounded: instead of lengthening dole queues, job boards are now plastered with vacancies. It is also a paradox at a time when businesses are on the brink as coronavirus emergency support is removed and fears are mounting about inflation. With workers in demand and able to pick and choose jobs, pressure to increase wages is likely to mount, too.
James Reed, chairman of the recruitment agency Reed, described a “sea change” sweeping the jobs market. Reed said yesterday that 18,297 openings had been added to its website in the past 24 hours. More than 240,000 positions are now being advertised, compared with 72,000 at the low point last year.
“The last couple of years, it’s been what we’d call a buyer’s market, but the labour market, I would say right now, is becoming a seller’s market,” Reed said. “That’s good for workers with skills, as they will be able to demand a higher price — you would expect wages to go up.”
While data last week showed wages grew 4 per cent in the year to March, the figures are distorted by the fact that lower-paid workers lost their jobs a year ago.
The contrast with last year’s scramble for work is stark. Last summer one London pub reported more than 400 applications for a £9-an-hour job. The tables have been turned: this time round, one chain is offering punters £100 if they successfully recommend staff.
It is a markedly different picture from the one that economists feared the country would be facing shortly after it was put on life support in March last year, and the government introduced the furlough scheme to pay wages. Britain entered the pandemic with a jobs market in fine fettle — an unemployment rate of 3.8 per cent, its lowest since the 1970s.
When the horrors of the pandemic began to emerge, the Office for Budget Responsibility (OBR) forecast a jobs bloodbath. Almost four million would be out of work, with a 10 per cent unemployment rate by now, it predicted. Yet while Covid-19 tore though businesses, with thousands of jobs going, the toll has been nowhere near as dire as predicted.
Instead, the figure is closer to 1.7 million, with an unemployment rate of 4.8 per cent — although higher than the 1.3 million who did not have jobs before the crisis began. The OBR is still expecting another 500,000 will be out of work by the end of 2021, with a peak unemployment rate of 6.5 per cent.
What the OBR and others had not expected was the extension of Rishi Sunak’s furlough scheme. It will have been in place for 19 months by the time it is due to end on September 30.
The furlough scheme — which has been used to subsidise wages for 11.5 million staff at a cost of more than £60 billion — continues to distort the true unemployment situation. Workers on furlough count as employed. James Smith at ING estimated that last week’s Office for National Statistics data suggested about three million were still furloughed in the two weeks to May 2. Since then, pubs and restaurants have been able to start serving indoors.
Tony Wilson, director of the Institute for Employment Studies and adviser to the Labour government in the wake of the banking crisis, said the jobs market had “was turning a corner”.
Younger workers may have quit the job hunt to study, or found higher-skilled work, he said. The staged lifting of lockdown restrictions has also created a simultaneous clamour for workers, particularly in hospitality and retail. Then there is the shrinking pool of labour — possibly due to Brexit, but also to EU nationals who returned to their home countries and who now are unable to come back because of quarantine rules.
Smith pointed to an analysis by the Office for National Statistics that indicated a 7.4 per cent fall in the number of EU nationals on UK payrolls, a fifth of the drop in unemployment between the final quarter of 2019 and the last quarter of last year. He expects some of those workers will return once restrictions ease.
George Buckley, economist at Nomura, said shortages had also been reported in Australia, where foreign workers and students — who were largely ineligible for government job support — left. Farmers there have been unable to hire sufficient young people, leaving fruit to rot, while skills shortages have been reported in hospitality and construction.
Even though the Bank of England’s agents’ surveys show recruitment issues remain low, anecdotally employers are reporting problems as the Covid-19 restrictions ease — although in Birmingham employers are thought to be finding it easier to hire staff after layoffs by the car maker Jaguar Land Rover.
Marcello Distefano, 42, managing director of the Manchester-based San Carlo chain of Italian restaurants, suggested relaxing the threshold for EU workers to enter Britain, although this would not have an immediate impact because of the Covid restrictions. “Lots of people have left the industry,” he said, instead taking up jobs with less unsociable hours. “This is going to be the biggest challenge for our sector over the next 12 months.”
Some are resorting to desperate measures. Caravan, with six eateries across London, last week offered customers £100 in vouchers if they recommended a candidate who stayed on for a month. Chris Ammermann, 53, who co-founded the chain in 2010, said it was 100 staff short when it reopened for outside dining on April 12. It has since filled 50 positions. “We have been recruiting feverishly,” he said. “Some of our team are being approached by recruiters and offered higher packages.”
The Road Haulage Association last week warned of a shortage of HGV drivers. Rod McKenzie, director of policy and public affairs at the lobby group, cited one haulage firm that had to park up 80 trucks because of a lack of drivers. It reckons the driver shortage stands at 60,000, in part because EU truckers headed home for Brexit-related reasons.
In Britain’s factories it has also prompted employers to think differently. Sam Handley, a director of Nottinghamshire-based Swiftool Precision Engineering, spent one morning last week with a recruitment agency discussing how to hire the extra nine staff she needs. “We’re struggling more than we ever have to get proper, technically trained staff,” said Handley. “Are we going to have to put salaries up to stop people getting poached?”
Buckley has been monitoring employment figures, which have fallen more than unemployment has risen. He pointed to the 551,000 rise between the first quarter of 2020 and 2021 in those classified as “inactive” — not looking for work despite not having a job. That could include people living off a partner’s wage or redundancy pay.
“A large number of those people who have lost their jobs since the onset of the pandemic have skipped unemployment altogether and moved straight to inactivity,” he said. Reed added that people have been sitting tight in current roles “because they’re a bit uncertain about moving jobs”.
If those people start to look for work, the vacancies gap could close — especially as furlough ends and more people go back on the jobs market. But that may not be soon enough for employers such as Williams in Telford. While she let staff go during the early stages of lockdown, the 45 posts she is now trying to fill are “new” positions. In the past, the business has attracted workers from eastern Europe who no longer appear to be available, in part because wages have risen in their home markets. Williams, who joined the business at 20 as an invoice clerk, said Corbetts was working on a training academy. Her marketing pitch, she said, was “it’s a job for life”.
However, she added: “There’s a general consensus that so long as furlough continues, we’re going to have this same [hiring] problem.” Policymakers have a nervous wait for the end of the scheme.
Not all is rosy in the jobs market
While some employers may be struggling to find staff, it does not mean everything is rosy in the jobs market. Far from it: average hours worked — a key measure of employment — are still 7 per cent below pre-pandemic peaks. The young are suffering most. According to an analysis by the Institute for Employment Studies, the young account for two thirds of the fall in employment.
The IES also calculated that long-term unemployment is rising at its fastest rate since 2010 and at its highest in four years. Those over 50 (out of work for more than a year) and those aged 25 and younger (unemployed for six months) were most affected. The IES said these workers should be a target to get back into work. Rishi Sunak has already focused on the young through his Kickstart scheme, aimed at 16 to 24-year-olds already claiming universal credit. It allows employers to offer a six-month work placement for which the government pays 100 per cent of the national minimum wage, national insurance and pension contributions for 25 hours a week.
Another scheme, Restart, is for those who have been out of work for at least 12 months, but it is not due to start until June 28. The chancellor has allocated £2.9 billion for Restart, which aims to “break down employment barriers”.
