Skills and Labour Shortages

Margaret Ferrier Excerpts

Thursday 12th January 2023 Westminster Hall

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

I beg to move,

That this House has considered the matter of skills and labour shortages.

I am delighted to have secured this debate on labour and skills shortages across the UK. The reality of those shortages affects my constituency of North Ayrshire and Arran and every single constituency across the UK, so the matter should be of concern to all of us. It acts as a drag on our whole economy, and unless specific and deliberate measures are taken to address it, it will undoubtedly prevent the kind of economic recovery that we all want to see. I thank hon. Members for turning out for this important debate.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

I am sure the hon. Member will agree that the Government’s post-Brexit approach to migration has had a negative impact on the UK’s ability to fill crucial posts in sectors such as agriculture, farming, healthcare and the arts. Does she agree that the Home Office should be looking wholesale at the efficacy of visa programmes, rather than bit by bit, country by country?

[Patricia Gibson]

I absolutely agree with the hon. Lady. She tempts me to get into that particular area before I am ready to do so, but I will say more about it in a moment.

I extend my thanks to the Association of Colleges, the Chartered Management Institute, the Heart of London Business Alliance, the House of Commons Library, the Open University and several others for the helpful and informative briefings that they have provided for this debate.

The shortage of skills and labour affects, to a greater or lesser degree, every single sector of our economy and every area of our lives. It affects our productivity and our public services. We see it in areas such as health and social care. There are shortages right across our NHS —in radiology, audiology and that is not to mention doctors and nurses. The Nuffield Trust estimates that in England alone, the shortage of doctors in the NHS could be as high as 12,000, and the shortage of nurses could be over 50,000.

There are also shortages in food processing, agriculture, transport, haulage, construction, butchery, tourism, manufacturing, veterinary medicine, information and cybersecurity and hospitality. Pressures on supply chains have helped to increase the cost of goods and services, which we see particularly in the soaring cost of food.

As the title of the debate indicates, there is a shortage of labour and required skills in a range of areas. That matters. The Open University’s 2022 business barometer estimated that 78% of UK organisations suffered a decline in output, profitability and growth as a consequence of a lack of available skills. The Recruitment and Employment Confederation estimates that if labour shortages are not addressed, the UK economy will be £39 billion worse off each year from 2024. The Chartered Management Institute found that overall, 71% of managers said that their organisations experienced ongoing difficulties in recruiting the skilled staff they need.

The cost is huge. Research, again from the Open University, found that 72% of businesses had increased the workload on other staff because of staff shortages, and 78% reported that those shortages were causing a reduction in activity, service delivery, profitability and long-term growth plans. Significant strains are consequently placed on service levels and supply chains, and members of existing workforces leave due to the impact on their own wellbeing of prolonged staff shortages. According to the Federation of Small Businesses, 80% of small firms face difficulty recruiting applicants with suitable skills.

The number of vacancies unfilled across the UK is now slightly higher than the number of people registered as unemployed. Managers are doing all they can to recruit the staff they need. They may be doing so through the old-fashioned method of word-of-mouth recommendations, by engaging recruitment agencies, by use of social media and print media, by distributing leaflets and flyers advertising vacancies, by offering introductory pay bonuses, by paying more competitive salaries, and by revising their wider employment practices and policies to attract and retain those with the skills they need—such as offering flexible working hours where possible—but despite those best efforts, the challenges remain.

There are several reasons for the shortage of labour and skills across our economy. We know that the demand for labour has recovered faster than the labour supply since the pandemic; indeed, the labour demand is above pre-pandemic levels, while the labour supply is below pre-pandemic levels. When the pandemic hit, older workers responded to the initial reduction in labour demand by no longer looking for work, so they went from being unemployed to being inactive. Since the pandemic, the number of people unable to work due to health reasons seems to have increased. However, in October 2022, the Institute for Fiscal Studies’ longitudinal data showed that many among the older population who are economically inactive because of long-term illness left the labour market before they became ill—they left because they decided to retire. Indeed, with the advent of remote working, many older workers found that they quite enjoyed spending time at home and did not wish to return to the workplace, and they took the opportunity to retire as a result.

The other driver of the labour and skills shortages we face, which poses the real threat to our economic recovery and potential prosperity, is—as everyone in this Chamber and outside it knows—Brexit. Even a House of Lords report last month pointed to an increase in early retirement and changes to migrant worker patterns since the Brexit referendum as exacerbating the main drivers of those shortages. It found that

“Over the last few years many EU workers, who filled these roles, have left the UK.”

There is no dispute about the fact that before the EU referendum and the pandemic, free movement from the EU was a major source of labour in the UK. By 2020, an estimated 55% of foreign-born workers who said that they originally moved to the UK for work-related reasons were born in EU countries. Now, many have left the UK since the UK left the EU—years that coincidentally saw a pandemic, as well. Even if those workers who have left want to return to the UK, many will find themselves unable to do so because of the UK’s restrictive post-Brexit immigration policies. That is despite the fact that our economy—our labour market—needs them to fill the gaps that we are suffering, which are acting as a drag on our economy and our current and future prosperity.

--- Later in debate ---

[Theresa Villiers (Chipping Barnet) (Con)]

It is a pleasure to serve under your chairmanship for this important debate, Sir Graham. I warmly congratulate the hon. Member for North Ayrshire and Arran (Patricia Gibson) on securing it; it matters so much to many of our constituents. Although our views are very different on a number of matters, such as Brexit, I agree that addressing labour and skills shortages is crucial for our economy. That point was made strongly to me at a recent advice surgery by a constituent who has been struggling to recruit workers to her car repair business in Barnet. I strongly believe that apprenticeships can help us tackle that problem, and I will largely focus my remarks on them.

Apprenticeships are a highly effective way to improve people’s skills. That is important for several reasons. First, they make our economy more productive and competitive, and that boosts growth and raises living standards. They help plug the labour shortages that we have been hearing about this afternoon.

[Margaret Ferrier]

Does the right hon. Lady agree that if the Government invest both time and money in engaging unemployed people in younger age groups, and support them in careers that they have a passion for and enjoy, that could head off a further growth in labour and skills shortages? Could that begin to balance out the inactivity that we see in those approaching retirement years?

[Theresa Villiers]

I certainly agree that investing in adult education, apprenticeships and skills is crucial for giving people opportunities in life and the skills that they need. That is why I welcome the huge amount of work that the Government have done on this issue. Indeed, the Prime Minister identified that as a key priority for him.

Apprenticeships, skills and adult education are crucial in giving people the chance to succeed in life, whatever their background. They can be an engine of social mobility and social justice. Apprenticeships in the science and technology field can strengthen the capacity of our workforce to tackle the two huge environmental challenges we face: climate change and nature recovery. For those three reasons alone, I am a big enthusiast for apprenticeships. I have met a number of people whose lives have been transformed for the better because of them.