Job creation is up but skills shortage & rising costs are starting to bite UK business

cbi survey

The annual survey – in its 18th year, and with 342 respondents employing nearly 1m employees – found that more than two fifths of companies will grow their workforce next year, with permanent jobs outstripping temporary roles.

But despite the upbeat picture on job creation, firms are concerned about rising labour costs through the planned National Living Wage (NLW) and the apprenticeship levy, and against the backdrop of an unreformed business rates system.

Although companies expect to create more graduate jobs and apprenticeships next year, the rate of growth for both is easing.

One in six businesses believe the new apprenticeship levy is the right approach to tackle the UK’s skills challenges, with almost half anticipating it being costly and bureaucratic.

Carolyn Fairbairn, CBI Director-General, said: “The UK’s labour market has continued to outperform expectations with businesses delivering jobs in every region of the UK. But there’s a danger of Government complacency, with companies facing multiple increasing costs, through the apprenticeship levy, the national living wage and unreformed business rates, these are acting as a cumulative drag that could hamper growth.

“Given the uncertainty surrounding the effects of the National Living Wage, it is critical that an independent, evidence-based Low Pay Commission plays the main role in assessing its true impact and recommending future rate rises accordingly.

“The Government must be careful not to sacrifice prosperity for political expediency by saddling businesses with costs that could harm investment, which is critical to increasing productivity.”

More than half of businesses intend giving staff a pay award next year at or above the RPI rate of inflation, but nervousness remains about the impact of the NLW. Half of service sector respondents indicate they will raise their prices, 27 per cent will employ fewer people and 18 per cent will make changes to their reward packages as a result.

As the economy heads towards full employment, there is a risk that skills shortages continue to worsen. Further restrictions on skilled migration would hamper business activity, with 29% of companies affected reporting they would fail to meet customer demand if they were unable to get the right person, in the right place at the right time. And more than a quarter of respondents said they would look to move certain functions or activities overseas.

Emma McGuigan, Managing Director, Accenture Technology, UK & Ireland said: “Business optimism is absolutely clear, but these findings also signal a real challenge in the employment landscape. Most significantly, just under half of respondents reported a lack of skills is threatening to have a major impact on the UK’s labour market competitiveness.

“For that reason, over half of respondents cited the development and maintenance of digital skills within organisations as having a new urgency, especially as a way to develop new revenue streams. The workforce of the future will not just be more digitally literate, but more capable of delivering new digital business models, customers experiences and business partnerships. These broader digital skills will be essential to boosting the UK’s competitiveness and sustainable employment growth.”

Fairbairn added: “Skills shortages remain a problem, so both the Government and businesses must contribute to building a higher skilled domestic workforce as well as allowing British companies access to the most capable people from overseas.

“Ultimately, we want to see the Tier 2 visa cap raised and for the UK to establish a longer-term and more realistic immigration policy that recognises the economic benefits of skilled migration.

“We know there are significant public concerns about the social impact of high levels of immigration, which should be addressed. But we also need an economy that is thriving and growing to pay for the public services of the future.”