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UK Skills and Labour Shortages: Understanding the Causes and Impacts

In recent months, businesses across the UK have been facing a shortage of workers, with many struggling to find employees with the relevant skills. The situation has been highlighted by the Office for National Statistics (ONS), which reported in November 2022 that 13.3% of businesses surveyed had experienced a shortage of workers. This has been a persistent issue since October 2021, with the exception of August 2022, when 16.8% of businesses reported a shortage.

The industries most affected by worker shortages are Accommodation and Food Services, where 35.5% of businesses are experiencing a shortage, and Construction, where 20.7% of businesses are struggling to find workers. Meanwhile, the number of vacancies in the UK has remained high, with 1.19 million vacancies reported between September and November 2022, similar to the number of unemployed people.

One of the key reasons for the shortage of workers is the recovery of labour demand, which has outpaced the recovery of labour supply since the pandemic. The Bank of England's August 2022 Monetary Policy Report highlights that while labour demand is above pre-pandemic levels, labour supply is below pre-pandemic levels. This is due in part to a rise in economic inactivity, with people who are not in work and not looking for work. In August-October 2022, the leading reasons for economic inactivity were being a student (27%) and a long-term illness (27%), while 13% were inactive because they were retired.

Brexit-related factors may also be contributing to labour supply issues in the UK. The Bank of England suggests that slowing population growth, driven by lower net migration from the EU, is partly responsible for decreased labour supply. An ONS article from September 2021 reports that almost half of businesses in the Transport and storage sector (46% of businesses) cited a lack of EU applicants as a reason why they were unable to fill vacancies, as did over a third of businesses in Administration (40%), Education (39%), and Arts and recreation (36%).

To address these challenges, the UK government has taken some steps to support employers and employees. In November 2022, the Prime Minister asked the Work and Pensions Secretary to review issues holding back workforce participation, with a report expected early in the new year. The government has also responded to difficulties with recruitment after the end of EU free movement by making a temporary exception to the ‘skilled workers’ criteria under its ‘points-based immigration system’ for care workers and introducing a bespoke visa for seasonal agricultural workers. Additionally, during the pandemic, the government introduced a number of training and employment support schemes to help people get back into work.

In conclusion, the shortage of workers and skills in the UK is a complex issue with multiple causes. While the recovery of labour demand and the impact of Brexit-related factors have contributed to the problem, the government is taking steps to address the situation and support employers and employees. These steps include the Health and Care Work visas and the Skilled Worker Visas. As the UK economy continues to recover from the pandemic, it will be essential to monitor these developments and respond to the changing needs of the labour market.



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