Three quarters of firms raise fears over access to labour in new survey

The UK’s jobs outlook is strengthening, with a net balance of 50 per cent of firms expecting to grow their workforce in the next year, according to the annual CBI and Pertemps Network survey.

However, around three quarters (76 per cent) of businesses are reporting access to labour as a threat to the UK’s labour market competitiveness – the highest proportion since the question was first asked in 2016.

The survey, which is now in its 24th year and had 422 responses, found:

87 per cent of businesses are planning to recruit permanent roles this year, with nearly half of firms (46 per cent) expecting higher levels of recruitment and only nine per cent expecting lower levels of recruitment for such roles compared to the past year.

Access to skills (noted by 77 per cent of companies) and the ability to move UK workers across the EU (69 per cent of companies) also feature heavily in businesses’ list of current concerns.

Asked for their top three factors vital to labour market competitiveness, 89 per cent said finding enough people with the right skills, followed by a flexible labour market (47 per cent) and a healthy workforce (35 per cent).

Positively, nearly seven in 10 firms (68 per cent) are planning to either increase pay in line with or above inflation – making the rebound the highest since the question was first asked in 2009.

Nearly three in five firms (59 per cent) are keeping COVID-19 safety measures in place to support employees’ confidence to return to offices.

As employees return, businesses are expecting changed working patterns to stay. Compared to working pre-pandemic, over three quarters (76 per cent) expect the use of hybrid working to increase, 40 per cent expect full time remote working to increase, and 58 per cent expect informal flexibility to increase in their organisation.

Matthew Fell, CBI chief policy director, said: “After a challenging year it’s encouraging to see the jobs market rebound.

“With demand returning, businesses both small and large, have put their recruitment plans into action.

“But as the UK’s labour market emerged from one crisis, it’s been plunged into another, with shortages holding back growth.

“Whilst firms have been stepping up to address labour shortages through further investment and training, these steps take time and do little to ease the pressure firms are facing now.

“From logistics to hospitality, firms are feeling strain across the whole economy, and expect this to continue not just for two months but two years.

“Immediately reviewing and updating the Shortage Occupation List so that firms can temporarily fill the most significant vacancies would provide businesses with some breathing room.

“In the longer-term, skills policies should help workers gain the abilities needed to fill shortages.”

More businesses expect to match or exceed inflation at their next pay review, but almost half of firms (47 per cent) believe labour costs are impacting labour market competitiveness

Nearly one in four businesses (24 per cent) expect to increase pay above inflation and 44 per cent of firms plan to increase pay in line with inflation, up from 29 per cent in 2020.

Encouragingly, fewer than one in 10 businesses are planning to freeze pay (8 per cent), down from 33 per cent in 2020. However, the proportion of businesses that believe that labour costs are impacting labour market competitiveness has increased from 34 per cent in 2020 to 47 per cent.

Most respondents affected by the National Living Wage (NLW) believe the Low Pay Commission should take the cautious approach of matching inflation next year (56 per cent), while around one in ten businesses (12 per cent) have asked to freeze the rate.