With the cost-of-living crisis hitting households across the UK, it’s understandable that staff are looking to boost their earning capacity’. While the public sector salary disputes are an on-going issue that are unlikely to be resolved any time soon, within the private sector, the potential to lose out on ideal recruits due to the remuneration on offer is a real concern that needs to be addressed.
In fact, in our recent report on the UK jobs market in conjunction with Bullhorn, the global leader in software for the staffing industry, we found a concerning trend. The data showed that average permanent salaries have, in fact, been dropping, down 3% year-on-year in January and -5% between November 2022 and January 2023.
While this is likely to be driven by the economic uncertainty of the last few months, when we look at the current environment we’re operating in, reducing investment in people should be a last resort. Historically recruitment has acted as a bellwether for the broader economy. A contraction in hiring activity acts as an indicator that markets are struggling.
This hasn’t been the case during this latest period of uncertainty, though. Recruitment has remained relatively stable, which when we consider the spikes noted during the first half of 2022, puts the UK in an incredibly unusual position where hiring is buoyant while markets are struggling.
The data from our report with Bullhorn showed that recruitment levels between November 2022 and January 2023 remained relatively stable, with permanent jobs up 2% and contract rising 3%. While the Office for National Statistics (ONS) showed a decline in hiring, figures from January were still at record highs.
Investing in skills
While remuneration packages are certainly an issue that needs to be front-of-mind for today’s business leaders, what is perhaps of more pressing concern are the skills shortages across the UK. Despite a slowdown in hiring activity, demand for top talent is still rife.
A recent survey from BusinessLDN, FSB London, LCCI and CBI London showed that 65% of the Capital’s businesses are struggling to fill open vacancies. This issue is being felt on a national level and our members are reporting that top talent is increasingly hard to attract. Addressing this will take a combination of efforts from businesses and authorities alike.
While employers do need to ensure they are offering competitive employment packages, it is the investment in skills across the country that will deliver a more sustainable solution and that’s where a skills-focused public policy environment needs to be prioritised by the Government.
In order to support the creation of a globally competitive skills environment, we have highlighted to the Chancellor that three key actions are needed swiftly:
A national skills strategy which recognises regional hubs
A UK-wide strategy that plays on regional strengths through investing in hubs such as Newcastle and Sheffield where tech and niche scientific jobs are in demand should be a priority.
Apprenticeship Levy reforms
The Levy needs to be used for shorter, more flexible modular training for not only 18–24-year-olds, but also ‘lane changers’ and older workers. A tailored approach that targets regions suffering from labour shortages and enables independent professionals and those from the self-employed workforce to fund their skills training by transfer of levy funds is also required.
The UK needs to be able to attract highly skilled international talent to bolster the economy. In order to achieve this, the Government must put in place the right regulatory environment, visa routes and recruitment environment to allow employers to draw talent from across the world and expand globally.
Employers may be cautious given the uncertainty that we’ve been experiencing, but reducing salaries and failing to invest in people will have a longer-term negative impact. We’ve seen in previous periods of economic disruption that how staff and new recruits are treated plays a significant role in attracting talent when markets are on an upward trajectory. Reducing staffing budgets now will only further exacerbate the skills shortages that we’re still seeing across the country.
On a longer-term basis, though, the strength of the UK’s highly skilled labour market needs to be bolstered – and that’s where the right Government actions can be pivotal to economy stability.