THIS week brought some long-awaited good news for Britons’ pay packets, as ONS data showed that average wages have beaten inflation for the first time since 2009. The jobs market outlook is rosier than it has been for years, but we are now facing the great irony of recovery. Having waited so long for it, we are not ready.
Nowhere is this more apparent than in the sheer scale of skills shortages facing the UK economy, and particularly in London, its powerhouse.
The pattern of wage growth provides a very clear illustration of Britain’s talent shortages, arguably the single biggest threat to the nation’s long-term economic health. Our analysis of job placements over the past year shows that professionals in the areas with the most pronounced talent gaps – notably construction and property, IT and finance – are already enjoying pay growth of 10 per cent or above. This is nearly ten times the national average.
The economy is on the mend, confidence is up – 70 per cent of London businesses said they expect activity to pick up over the coming months, according to our new report Hays Salary and Recruiting Trends 2015 – and companies are looking to hire again. Yet there are just not enough people to fill the gaps in many industries. People in these sectors often have the pick of two or three jobs, they get snapped up quickly by employers, and they receive a counter offer from their current employer, which can push their salary up even further.
This may be fantastic news for the individuals concerned, but it’s a real concern for the London and wider UK economy. Quite simply, there can be no growth without the people to drive it forward, and we know companies are already struggling to recruit staff with the right skills. Leading entrepreneurs like Sir James Dyson have been voicing concerns for some months about hiring enough engineers to support their growth ambitions, and they are not alone.
In fact, our research shows that 80 per cent of companies expect to encounter skills shortages when recruiting over the next year and the situation could still worsen. With more and more businesses hiring, people will spot an opportunity to earn more elsewhere and decide to make a career move. Soon the situation could reach crisis point for employers fighting for the talent they need.
Every time a skilled job goes unfilled, this creates a cascade of lost opportunity. Companies grow more slowly, new roles are not created as fast and often this affects supporting roles, vital stepping stones onto the career ladder for our young people. In the long term, this translates into lower GDP growth and the danger of a “lost generation”.
All this goes to show that skills shortages are a very real and pressing problem. If we are serious about London and the UK remaining a winner in the global economy, our businesses have to be able to tap into the talent, when they need it, in order to develop and grow.
Nigel Heap is managing director of Hays UK & Ireland.