Getting back to business with one hand tied behind our backs

Labour shortages are biting right across the economy. Vacancies are higher in almost every sector than before the pandemic.

Monday, 20th September 2021, 1:00 pm

Labour shortages are biting right across the economy. Vacancies are higher in almost every sector than before the pandemic.

And it’s a myth to think this is a fleeting concern – it’s both a short and long-term issue. It won’t sort itself out when the Government’s furlough scheme comes to an end. And it’s putting our economic recovery at risk.

This wasn’t part of the plan. For months, Northern Irish businesses have been raring to go, to unleash potential held back by coronavirus restrictions and make up for lost time. I think we’ve all been looking forward to seeing step changes in the way things are done, to finally shake off the lacklustre productivity that has weighed us down for the past decade.

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Adrian Doran, CBI NI Chair

Yet the current labour shortages are seeing some firms’ output dropping by some 10% or 15%, manufacturing lead times doubling, house builds slowing, opening hours shortening and customer deliveries turning up late.

The shortages are at multiple skill levels. They’re also becoming increasingly visible to consumers, with fewer product lines on the shelves of supermarkets across the UK. Everyone can see something’s not quite right.

Alongside a steady stream of anecdotes from businesses, our regular CBI surveys are adding a quantitative element to the picture. In July, a third of manufacturers were concerned that a lack of skilled labour would limit output in the quarter ahead – the highest share since the mid-1970s. In August, nearly half of consumer services firms were concerned that labour shortages would limit investment in the year ahead – the highest share on record.

It’s not just us. The UK’s Food and Drink Federation found that 70% of businesses are currently short of drivers. And this is where the bidding war for recruits seems most acute. Signing on bonuses are becoming commonplace even for short-term contracts. And that kind of inflation is hitting our smaller businesses hard.

We’re also hearing reports from NI businesses across all industries and sectors of acute labour and skill shortages – with many manufacturers currently sitting on increased vacancy levels.

We need to work hard and act fast to find the solution

There are existing levers in the UK’s control which can be pulled - like placing drivers, welders, butchers and bricklayers on the Shortage Occupation List. This could make a real difference. The Government promised an immigration system that would focus on the skills we need rather than unrestrained access to overseas labour.

But ultimately, I firmly believe the solution lies in a long-term economic model, in which we seize the moment and embrace the chance we’ve had to take stock of our strengths and weaknesses and to act on them. The Government’s ambition that the UK should become a more highly skilled and productive economy is right. It will drive better business performance, wages and living standards for everyone. But there is no short cut to the finishing line. This transformation requires a sustained partnership between business, Government and the Executive to deliver it.

Firms need time to adjust to any new immigration system. It needs them to double down on investment as soon as their Covid-ravaged balance sheets allow. It urgently needs them to upskill their workers and train new, UK-based recruits.

But that all takes time, particularly in Northern Ireland, where firms continue to compete on an all-island basis without unfettered access to the European labour market.

Companies also need the Government to give them the breathing space to deliver on the commitments that so many of them have already made – in designing new apprenticeships, developing new training schemes and opening their doors to new talent pools.

Our members suggest their initiatives could take a couple of years to come to fruition. Our economic recovery can’t wait that long. If the Government deployed a few temporary and targeted interventions, using training funds and visas, it will help us jump the hurdles right in front of us.

There is no shame in a quick fix when it clears the path to greater things. Like building on that long-term plan to make sure we have the skilled workers we need for the kind of jobs – the kind of economy – we want in the future.

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