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Monday, 21 December 2015 03:26

Skills shortages and labour costs are slowing business growth

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Businesses are looking to grow in 2016 but the continuing digital skills shortage and higher wages are identified as threats to that growth.

The skills shortages across the UK are continuing to bite with firms identifying this as the top threat for the second year running.  According to the latest CBI/Accenture Employment Trends annual survey more than two fifths (43%) of businesses will grow their workforce next year, with permanent jobs outstripping temporary roles.

The survey, carried out between August and October 2015, found jobs growth has continued across the whole of the UK however, as the economy heads towards full employment, there is a risk that skills shortages continue to worsen and more than a quarter of respondents said they would look to move certain functions or activities overseas.

Commenting on the report 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 (46%) 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 (52%) 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.”

Growth in permanent jobs (35% plan to increase recruitment of permanent positions with 11% planning to reduce it, leaving a positive balance of +24%) is set to increase faster than temporary positions (16% plan to increase recruitment of temporary positions with 12% planning to reduce it, leaving a positive balance of +4%).  Encouragingly, the survey found 62% of businesses expecting to have entry-level roles suitable for young people aged 16-24.

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 (16%) believe the new apprenticeship levy is the right approach to tackle the UK’s skills challenges, with almost half (47%) anticipating it being costly and bureaucratic (the survey was carried out before the details of the apprenticeship levy were confirmed in the Autumn Statement on 25 November 2015).

To attract new staff and to keep current staff more than half of businesses intend giving their employees a pay award in 2016 at or above the RPI rate of inflation, but nervousness remains about the impact of the NLW. Half (51%) of service sector respondents indicate they will raise their prices, 27% will employ fewer people and 18% will make changes to their reward packages as a result.

Additionally businesses are also looking at ways to improve their flexibility, with nearly four in five respondents (79%), multi-skilling there employees to improve the organisations’ productivity and capacity to adapt, and nearly three quarters (73%) offering employees flexibility over their work location.

On apprenticeships, 25% plan to increase recruitment with 6% planning to reduce it, leaving a positive balance of +19% respondents looking to recruit next year, and more than a third want to see employers given greater control over the levy (the survey was carried out before more details of the apprenticeship levy were confirmed in the Autumn Statement on 25 November 2015).

Graduate positions are also set to rise, though at a slower rate than last year. 22% of firms are set to increase graduate recruitment, with 6% planning to cut back, leaving a positive balance of +16%.

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