Brexit may spell skills shortage
Economist Andrew Webb on how a lack of clarity could reduce supply of ready labour
❝ Some companies are already struggling to find carpenters, joiners and bricklayers
❝ The number of nurses registering from the EU is down by 96% in the year since the referendum
The availability of appropriately skilled people is never far from the minds of employers and policymakers. Report after report notes the importance of skills to economic success, and there is a noticeable increase in reports on skills across the UK and Northern Ireland from employer bodies such as the CBI and Chamber of Commerce.
As reported in late summer, a Cbi/pearson education and skills survey found that more than four in five companies in Northern Ireland expected to hire in highskilled roles in the next three to five years, but only three in every 10 companies were confident of having the supply of talent needed to fill them.
Most recently, the Bank of England reported the views from its network of regional agents dotted across the UK. The regional agents’ views were collated into various measures, including an index of recruitment difficulties. This is at its highest level since 2015, suggesting skills shortages are beginning to bite. That they could result in pay increases would be no bad thing for the recipients, but pay increases driven by shortages erode competitiveness and send out a negative message to potential investors.
Individual sectors are also beginning to air their skills shortage studies. A Recruitment & Employment Confederation survey noted a marked decline in the availability of workers across the UK, coupled with an increase in demand for staff across the public and private sectors.
The Federation of Master Builders’ state of trade survey of SMES in the industry found there had been growth in the sector, but also that many held concerns about the future. Just over 60% said they were already struggling to find carpenters and joiners, while many were unable to find bricklayers. Further recent sectoral studies I have been undertaking also suggested difficulties in finding the right staff.
The Northern Ireland Skills Barometer, which estimates the extent of future demand across a range of skills levels, supported the finding of these studies — that the demand for skills will outstrip projected supply over the next decade. There is a marginal under-supply of skills at graduate levels and a more acute shortage at mid-tier skills levels.
Of course, one easy way to fill skills gaps in recent years has been with migrant workers. Northern Ireland has been doing just that for some time. Close to a decade ago, estimates suggested that around 5% of the labour force was made up of migrants. More recent estimates suggest that 13% of the total workforce is from outside the UK or Ireland.
Undertaking recent research by the Northern Ireland Hotels Federation, the importance of workers coming from outside Northern Ireland came back to the front of my mind.
Within the hospitality sector, almost one in three workers is from outside the UK and Ireland — crucial to the successful functioning of the tourism sector. Other sectors with a strong reliance on workers from outside the UK and Ireland include manufactur- ing, administration and retail.
A lack of clarity around how workers from outside the UK will be treated (in terms of access) during and after the Brexit process could reduce this hitherto easy-to-get supply of labour.
To put the importance of this source of labour supply into context, in the three years prior to the global financial crash, when Northern Ireland was enjoying significant employment growth, applications for National Insurance numbers to adults from overseas totalled 53,000 — close to 18,000 per year.
There are indications that the arrival of workers from outside the UK has started to decline.
For example, estimates of current nursing vacancies appear to be in excess of 50,000 across the UK, and the number of nurses registering from the EU is down by 96% in the year since the Brexit vote.
Locally, statistics on National Insurance number registrations from people outside the UK declined by 7% and 5% in 2015/16 and 2016/17 respectively. The scale of these reductions in labour supply places an even greater importance on employers and policymakers ensuring that training and employment programmes offer relevant training and engage those harder-to-reach groups, such as the long-term unemployed and older people.
The uncertainty surrounding Brexit appears to be impacting on the number of people coming here to work. Where might labour come from if the flow from outside Northern Ireland reduces further?
The answer most likely lies in training and employment programmes. We are not short of programmes, not by any stretch of the imagination.
Perhaps increasing skills shortages will push our policymakers to put their shoulder to the wheel and develop more innovative, more co-ordinated training and employability programmes that make progress in reducing Northern Ireland’s significant levels of economic inactivity.
We are already seeing some innovative approaches to addressing skills shortages.
For example, Belfast City Council has just teamed up with two of the new hotels coming to the city to form a Hotel Employment Academy.
People who complete two weeks of training are guaranteed an interview for one of up to 200 jobs.
More initiatives of this type could prove crucial in the years ahead.
In next week’s Economy Watch, we hear from Danske Bank economist Conor Lambe
The hospitality industry has been a popular choice for overseas workers in the UK