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UK - Shortage of technical skills impacts on pay settlements

08 August 2011

The number of new job vacancies in engineering and manufacturing has surged +50% year-on-year, putting pressure on pay settlements as skills shortages intensify, according to research conducted by Staffing Industry Analysts and Innovantage, the provider of real-time labour market intelligence, on behalf of the Association of Professional Staffing Companies (APSCo).

The research shows that 43,348 new engineering and manufacturing jobs were advertised on job boards in June 2011, compared with 28,952 in June 2010. The figures are from the new APSCo Monthly Trends report, which analyses job vacancies and placements across the UK professional staffing sector.

The surge in demand for engineering and manufacturing skills is a result of manufacturers ramping-up output as export orders rise on the back of the weak pound and buoyant Asian demand.

The decision by the government to ring-fence capital investment on major infrastructure projects, such as Crossrail, following last year's Spending Review has also contributed to significantly higher demand for engineers in the UK itself. The government committed over 40 billion Pounds to infrastructure projects in the Spending Review.

Export focused industrial companies, particularly those servicing extractive industries, such as mining and oil & gas, are struggling to fill vacancies. Demand for engineers in the energy sector, such as nuclear and renewables, is also buoyant.

The surge in demand for engineering and manufacturing skills could feed through to higher pay settlements at a time when industrial companies are struggling to contain factory gate prices.

Ann Swain, Chief Executive of APSCo, commented 'the engineering and manufacturing sector has been one of the few success stories of the UK economy over the last few years. Many hi-tech industrial companies, particularly those which are export-oriented, have seen orders rise significantly, fuelling demand for already scarce skills.'

'Businesses are struggling to recruit the right technical or engineering skills. Training budgets were slashed during the recession which has exacerbated skills shortages. With demand for engineers rising, many latent skills shortages, which were temporarily forgotten during the recession, are once again coming to the fore.'

'Huge numbers of engineering jobs have remained on the official shortage occupation list for visas all the way through the recession. I have seen research that shows that a third of employers are finding it hard to recruit suitable senior engineers, while one in five face difficulties in recruiting suitable graduate engineers.'

Output price 'factory gate' annual inflation for all manufactured products rose by +5.7% in June 2011, according to figures from National Statistics.

John Nurthen of Staffing Industry Analysts, said 'the success of the export-oriented manufacturing sector, combined with greater investment in infrastructure projects, has stoked demand for manufacturing and engineering skills. Employers are struggling to source the skills they need, which is undermining their competitiveness and threatening their ability to grow.'

'Factory gate inflation is a real concern for British manufacturing and engineering companies. This is partly due to raw material costs, but other input costs, such as pay inflation, are also factors. As the market becomes increasingly candidate-led, employers will come under greater pressure to award inflation-busting pay increases, which could further undermine their competitiveness globally.'

Job vacancies across the UK economy up by +14%

Job vacancies across the whole UK economy jumped +14% year-on-year in June, from 446,841 to 510,795.

Other than manufacturing/engineering, the best performing sectors were Science/Technology (+26% year-on-year increase in vacancies), Property/Construction (+26% year-on-year increase in vacancies) and IT (+25% year-on-year increase in vacancies).

The strongest region of the jobs market was the West Midlands, where the number of vacancies jumped by +23% year-on-year.

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