A sharp increase in in non-EU citizens coming to work in the UK has helped to ease recruitment difficulties for medium and high-skilled roles, according to the latest quarterly Labour Market Outlook from the Chartered Institute of Personnel and Development and The Adecco Group.

The report, which surveyed 2,104 employers on their pay and hiring intentions, found that despite employment growing strongly over the past year, the number of applicants chasing each medium and high-skilled vacancy has fallen relatively modestly compared with the same period last year. However, the number of people applying for low-skilled roles has dropped by a fifth over the past year.

Where employers last filled a low-skilled vacancy, they received a median number of 16 applicants for that role. This compares with 20 applicants in the summer 2018 report and 24 applicants in the summer 2017 report. This may be partly due to subdued growth in the annual increase in the number of EU-born citizens in employment, which remains well below the pre-referendum average. 

In contrast, the supply of medium-skilled and high-skilled applicants has held up relatively well.

This can be partly attributed to the sharp increase of 123,000 non-EU citizens in the UK workforce between Q1 2018 and Q1 2019, the majority of which will have been subject to a skills threshold.  This compares with a decrease of 6,000 between March 2017 and March 2018 in the number of non-EU citizens in employment in the UK.

This increase has been mainly driven by the buoyant recruitment of nurses and medical practitioners,  following a relaxation to remove doctors and nurses from the Government’s migration cap in June 2018.

According to the latest official data that looks at employment levels by country of birth, non-EU citizens account for more than a third of the 364,000 increase in employment in the UK between Q1 2018 and Q1 2019. 

The overall fall in the number of applicants is putting upward pay pressure on a significant minority of employers. Median basic pay expectations in the private sector increased from 2% to 2.5% compared with three months ago. Median basic pay award expectations have also risen in the public sector from 1% to 1.5%. Overall, the average basic pay increase remains steady at 2%.

The report also looked at net employment balance, which is a measure of the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels. This balance has fallen from +22 to +18, the lowest number recorded since Winter 2017.

Employment confidence is highest in Wales (+29) and Scotland (+21), and lowest in the East Midlands (+7) and the East of England (+7). The labour market remains tight, which is putting pressure on employers to increase pay.

More than a third of employers (36%) plan to increase basic pay by at least 3% compared to 28% of employers in the same period last year. 

The key factors driving pay awards of 2% or more are inflation (43%) and the going rate of pay elsewhere (37%). Recruitment and retention difficulties were also a factor (29%).

Alex Fleming, Country Head and President of Staffing and Solutions, the Adecco Group UK and Ireland, commented, “In our tightening labour market ensuring businesses have the right supply of talent isn’t a new issue and during these uncertain times the “grow your own” mentality has become more important than ever for organisations. Workforce planning comes into play again as organisations need to be constantly looking forward and anticipating their future needs and training their own talent accordingly. 

“Planning ahead for workforce strategies is a long-term solution that now needs to be addressed more urgently than ever so the labour market can thrive with the right talent in place,” Fleming continued. “Conversely, in the shorter term imaginative recruitment strategies are also needed to find the right kind of skillsets to bring into organisations, for example unlocking hidden pools of talent can hold considerable value for employers and should be seriously considered as an important source.”