Quarterly Recruitment Outlook: Labour Cost Pressures Bite As Hiring Issues Remain

• Nearly three quarters of firms attempting to recruit have faced difficulties (73%)
• Hospitality firms remain the most likely to report challenges in hiring staff (79%)
• 66% of companies say labour costs are a financial pressure
• 61% of companies have attempted to recruit in the quarter

The latest Quarterly Recruitment Outlook (QRO), a survey of nearly 5,000 UK firms of all sectors and sizes, by the British Chambers of Commerce (BCC) Insights Unit, reveals that many firms are still facing problems hiring staff.

The third quarter results for 2023, show a continuing decline in the percentage of companies facing hiring difficulties. The figure has dropped 9 percentage points from the historical high of 82% in Q4 2022. The figure has now fallen in each quarter of 2023 – but remains above 70%.

Attempted recruitment in Q3 was virtually unchanged from the previous quarter, with 61% of firms looking to find staff (60% in Q2).

Recruitment difficulties are being felt across the economy, but the hospitality sector continues to suffer the most, with 79% of firms reporting hiring challenges in Q3 (compared to 86% in Q2). This is closely followed by both construction & manufacturing on 78% (down from 86% and 81% respectively in Q2). 72% of retail businesses said they had experienced recruitment issues.

Of the hospitality firms reporting problems, 58% faced difficulties in finding semi/unskilled workers, 41% skilled manual/technical staff. In the construction and engineering sector, 78% faced problems getting skilled manual/technical workers, but just 21% for semi/unskilled.

As businesses continue to face a series of economic headwinds, most are still reporting no increase to investment in workplace training. Just over a quarter of firms reported an increase in staff training (27%, the same as Q2), with 13% reporting a drop (14% in Q2).

Labour costs are cited by the most firms as a source of cost pressure, with 66% citing this (compared to 63% in Q2 and 67% in Q1). 59% of firms say they’re concerned about energy costs.

Responding to the findings, Jane Gratton, Deputy Director Public Policy at the BCC said:

“The scale of the recruitment crisis remains huge, despite a welcome fall in the number of firms reporting hiring problems.

“Employers are offering more flexible working wherever possible but are still struggling to hire and retain the right staff to help get them through these challenging economic times. The picture in the hospitality and manufacturing sectors is particularly worrying.

“We have just under a million job vacancies in the economy, and skills shortages are damaging businesses’ ability to operate profitably – as well as impacting the wellbeing and morale of remaining staff.

“Businesses and the government need to work together to resolve this problem. Bringing more people back into the workforce, with rapid retraining programmes and comprehensive support, will help. While many employers remain sharply focused on investment in training, most businesses need more help to get the workforce skills they need. Positive interventions in the tax and skills system would be welcome, to boost investment in workplace training and development.

“It’s high time the government listened to employers and brought in the urgent reforms to the apprenticeship levy that will allow more people to get the training they need. We also need long-term commitment to Local Skills Improvement Plans that are bringing together employers and providers to plan for skills needs.

“And where businesses have tried everything possible to recruit people locally, a flexible and affordable immigration system must be there to support them. The Shortage Occupation List does not reflect the reality businesses experience on the ground. Last week, the Migration Advisory Committee underlined concerns that the list is not an effective tool to address labour shortages. An alternative must be developed urgently and in consultation with business.

“Our economic forecasts suggest the coming couple of years are going to be tough for everyone. Solving the recruitment crisis will be key to getting the economy growing again.”