Wednesday 1st Nov 2023

Quarterly Recruitment Outlook: Labour cost pressures bite as hiring issues remain

Nearly three quarters of businesses attempting to recruit have faced difficulties (73%)
Hospitality businesses 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 businesses of all sectors and sizes, by the British Chambers of Commerce (BCC) Insights Unit, reveals that many businesses 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 businesses 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 businesses 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 businesses 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 businesses 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 businesses as a source of cost pressure, with 66% citing this (compared to 63% in Q2 and 67% in Q1). 59% of businesses say they’re concerned about energy costs.

Responding to the findings, Suzanne Caldwell, Managing Director of Cumbria Chamber of Commerce said:

“A substantial number of UK businesses are still reporting recruitment challenges, despite a welcome decrease since Q4 2022. Here in Cumbria, businesses across all sectors continue to report recruitment and retention issues. Alongside the wider challenges we face specific issues, such as the huge additional demand feeding through from BAE Systems. Although it’s great to have such a success story in the county, it does also pose real challenges given our workforce shortages.

Employers are continuing to work to provide greater flexibility in working arrangements, including measures like moves to four day weeks. However they continue to grapple with the challenge of recruiting and retaining the right staff. This issue flags are a particular a concern in the survey for the hospitality and manufacturing sectors, but is by no means limited to those sectors.

Cumbrian businesses and other stakeholders are working hard to retain in and draw more people into the county to work and to develop new, relevant training & development offers. But even these efforts alone aren’t sufficient.

Collaborative efforts between businesses and the government nationally are needed to resolve this issue. While many employers are committed to investing in training, most require additional assistance. Positive interventions in the tax and skills systems would be a step towards solving this problem.

In instances where businesses have exhausted all options to recruit locally, a flexible and cost-effective immigration system must be in place to support them. The current Shortage Occupation List does not align with the realities experienced by businesses on the ground. An alternative solution, should be immediately developed, in consultation with businesses.”