Fall in number of new EU workers causing “supply shock” for UK businesses

Companies are suffering from staff shortages because of a fall in the number of EU nationals coming to the UK, according to the latest Labour Market Outlook from the Chartered Institute of Personnel and Development (CIPD) and recruitment firm Adecco.

Over 50% of the 2,001 organizations surveyed have raised starting salaries to recruit staff and increased wages to retain existing workers.

While demand for labor is robust, labor supply is failing to keep pace, exacerbated by a “supply shock” of far fewer EU nationals coming into the UK. The number of EU-born workers in the UK increased by 7,000 from the first quarter of 2017 to the first quarter of 2018, compared with an increase of 148,000 for the same period the previous year, a fall of 95%.

Forty per cent of companies said they have found it more difficult to fill vacancies during the last 12 months due to a combination of fewer and less suitable applicants. 

The number of applicants per vacancy has fallen across all levels of skilled jobs. On average, employers received 20 applicants for the last low-skilled vacancy they tried to fill, compared with 24 candidates in summer 2017. For high-skilled vacancies there was a fall from eight to six candidates over the same period.

In her IZA World of Labor article, Do migrants take the jobs of native workers?, Amelie F. Constant writes that “the economics of migration tell us that a country needs immigrants because its native labor force is not large enough to meet demand or specialized enough to handle technological changes. Vacancies exist even under high unemployment because native workers and jobs do not always match or because unemployed workers might not want or be qualified for the jobs available.”

Gerwyn Davies, senior labor market adviser for the CIPD, said: “With skills and labour shortages set to worsen further against the backdrop of rising talk of a ‘no deal’ outcome with the EU, the need for the government to issue consistent, categorical assurances about the status of current and future EU citizens, whatever the outcome of the negotiations, is more important now than ever.”

Constant concludes her article by saying that “Admitting immigrants with a mix of skills while maintaining flexible labor markets allows firms to adapt to the labor supply. Countries benefit from engaging rather than restricting immigrant workers.”

Read more articles on migration policy.