The strength of labour demand in the UK continues to fuel recruitment and retention pressures for more employers during the fourth quarter when compared to the previous quarter, according to the latest quarterly Labour Market Outlook from the Chartered Institute of Personnel and Development and The Adecco Group.

The report, based on survey data from 1,002 employers, found that employers seeking staff are being hit by labour shortages. The report suggests that labour supply constraints could be partly due to a fall in the number of migrants in UK workplaces.

According to the CIPD and Adecco report, among employers who currently have vacancies, 70% report that at least some of their vacancies are proving hard-to-fill, higher than in Summer 2018 (66%) and Spring 2018 (61%). At the same time, firms with hard-to-fill vacancies report that on average 43% of their total vacancies are proving hard to fill, compared with 40% in the summer 2018 report and 30% in the spring 2018 report.

Meanwhile, retaining staff has become a bigger challenge for a higher share of employers as 34% of employers report that it has become more difficult to retain staff at their organisation during the Q4 period compared with 27% during the summer period.

The report pointed to data that found the number of non-UK-born workers in employment in the UK fell by 58,000 in the 12 months to June 2018 compared with an increase of 263,000 in the 12 months to June 2017. This labour supply shock is largely driven by non-EU-born citizens. The number of non-EU-born workers in employment in the UK fell by 40,000 in the 12 months to June 2018 compared with an increase of 225,000 in the 12 months to June 2017.

In terms of the labour market implications of Brexit, the reduction in labour supply looks set to be constrained further by the introduction of migration restrictions on EU citizens, presumably in January 2021.

“It seems highly likely that the restrictions will affect low-skilled employers particularly hard, especially given the recent Migration Advisory Committee recommendation that there should be no formal low-skilled route for employers,” the report stated.

The survey data also suggested that the Youth Mobility Scheme, which has been proposed as a key solution to the recruitment needs for those who recruit lower-skilled workers, will not be sufficient for many employers. The data suggests that the Youth Mobility Scheme needs to be made more flexible, perhaps by removing age restrictions and/or increasing the period they can stay by at least a year.

Turning to pay, median basic pay rise expectations in the 12 months to September 2019 are 2%, unchanged relative to expectations three months ago. However, expectations have risen among public sector employers from 1.5% to 2% during the same period. 

Approximately half of employers that are currently facing recruitment difficulties and who say it has become more difficult to fill vacancies during the past 12 months report that they are raising starting salaries in response, at least for some roles.