Companies are forced to consider pay rises due to skills shortages

27/10/2017

The article highlights that the UK is increasingly suffering from skills shortages and that we will struggle to grow further just by using our current workforce.

The Recruitment and Employment Confederation has stated that 42% of companies now have no capacity to expand without taking on more staff.  This is up from 34% published last year.

The REC have said that this is the highest number recorded since the Brexit vote in June 2016 and has been carried out monthly.

The statistics indicate that the surge in hiring and fall in unemployment continues and is now at a 42 year low of just 4.3%

It shows that companies have no spare capacity to increase their output utilising the current staffing levels.  However, the number of firms increasing pay has gone backwards in recent months.  The REC found that 58% of firms have increased pay in the past year.  However, this is down from a high of 68% in the June survey carried out.

The Chief Executive of the REC, Kevin Green, gave a statement “Employers are showing a great deal of resilience as they continue to hire despite a growing number losing faith in the direction the economy is heading. The political climate isn’t helping the situation.  Businesses need clarity in order to plan effectively and so far the Brexit negotiations have not resolved any of the core issues.”

The Institute for Fiscal Studies warned that the public sector will find it hard to recruit and retain workers if the official cap on pay rises is not lifted soon. Public sector wages have fallen by 4% in real terms size 2009-10. The article goes on to state that on average public sectors workers have earned 2.9% more than their private sector peers, a gap that has shrunk from 3.1% in 2007/08 and from 6.5% in 2011/12. Keeping the pay cap at 1% per year would see this gap shrink further, the IFS anticipates.

In summary, the article shows an ever decreasing talent pool and companies now recognise that they cannot grow without more personnel.  Therefore, increased pay may be the option to attract the talent. The IFS estimates that increasing pay across the public sector in line with inflation or with private sector earnings could cost an additional £6 billion per annum by 2019/2020.

Food for thought indeed.

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