Rebuilding the UK’s Skills

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Reports of a recession in the UK at the end of 2022 have now been refuted, with the National Institute of Economic & Social Research (Niesr) confirming that we have avoided economic downfall. Interestingly, this hasn’t significantly impacted the staffing sector. It’s easy to look at reports from the Office for National Statistics (ONS) of falling vacancies and assume that this is an indication of hiring stagnating. But if we take a broader look at the statistics, this simply isn’t the case.

The number of vacancies in the UK between November 2022 and January 2023 was 1,134,000. This marks a fall from the same period a year ago. However, compare this to the data from November 2020 to January 2021 (before the pandemic hit the UK) when an estimated 599,000 vacancies were reported, and it’s clear that this latest fall in jobs hasn’t lessened the skills shortage. If we go back even further to November 2019 to January 2020, there were 810,000 vacancies in the country.

The reason I bring up these statistics is to highlight the unusual situation the recruitment sector has faced in the last few months. Usually recruitment acts as the bellwether to wider economic conditions, but we haven’t seen this despite the economic uncertainty towards the end of last year. Instead, the sector is still incredibly buoyant.

This does, of course, present a number of challenges. End-hirers have understandably been cautious when it comes to budgets as energy costs and inflation grew, plus further uncertainty regarding the economic stability of the country. This is perhaps why our latest Recruitment Trends Snapshot found that average permanent salaries had fallen to their lowest levels since May 2019.

However, recruiters are having to balance the end-hirers’ caution around finances with the demands of the candidates who still hold the cards. These individuals are themselves facing a cost-of-living crisis and remain confident enough in the jobs market to be willing to move for better pay. With key skills in short supply, this landscape is going to test the skills of even the more seasoned recruiters.

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While we can’t solve the cost-of-living crisis, APSCo believes the UK’s skills market can be strengthened. In fact, in our 2023 Public Policy plans we’ve outlined three key areas that need to be prioritized by the government to strengthen the country’s labor market:

Providing access to skills, training and development. The country’s access to skills needs to be improved through a combination of new approaches to training and broadening of the uses of Apprenticeship Levy funds. A national skills strategy that recognizes and supports urban hubs and provides a focus on modular, flexible training — including skills development for the flexible workforce — will be also be a necessity.

A regulatory environment that supports growth of the labor market. Regulation is required that is both appropriate for the modern workforce and recognizes the differing needs of the professional recruitment market, in particular the highly-skilled, self-employed segment of the workforce, which requires less protection through regulation. With the Employment Bill shelved, there is an opportunity to drive suitable change through the EU Reform Bill to deliver clarity around applicability of regulation to professional contractors. Appropriate regulation of the umbrella sector is also crucial in the immediate future.

Globally viable skills availability. The UK’s ability to attract international talent in a post-Brexit landscape needs to be strengthened. With a global shortage of experts in core sectors such as IT, engineering, healthcare, education, life sciences and “green skills,” a viable and attractive highly skilled visa route into the country is required. This includes flexible, short-term visas for non-UK citizens.

The recruitment market will remain buoyant for the foreseeable future, but the skills agenda is at a critical point where urgent action is needed. APSCo hopes that the upcoming Spring Statement has a clear and definitive focus on short and long-term skills solutions.