Skill shortages taking hold in UK business - 02/2001

Over two thirds of British firms are experiencing skills shortages, rising to a record level of 76% in the service sector, according to new research published by Reed.

More than 550 organisations throughout the UK were surveyed for the twelfth Reed Skills Index which has tracked demand for staff in the UK economy since May 1997. Over two thirds (68%) of organisations are currently finding it difficult to recruit suitably qualified and experienced staff, a drop of only four points since October and 20% higher than April last year.

The service sector continues to suffer the most with 76% of organisations reporting that they have experienced skills shortages. Other industry sectors are also experiencing problems, according to the research. 68% of manufacturing companies surveyed, and 64% of firms in the distribution/wholesale sector reported skills shortages. The public sector (excluding healthcare) is close behind with 62% of organisations experiencing difficulty in recruiting suitable skilled staff. The Thames Valley area, at the heart of the UKs so-called silicon valley is the worst hit in the UK, with skills shortages continuing to rise. 82% of Thames Valley firms, compared to 78% in the last quarter, say they are finding it hard to recruit suitably qualified staff. Northern Ireland and East Anglia are also experiencing particular difficulties, with 82% and 80% of firms, respectively, declaring a problem. While the problem is less acute in other UK regions, skills shortages are still being experienced by over half of organisations throughout the country. 58% of companies in the North East report skills shortages, compared to 53% in the North West, and 52% Wales.

The most acute shortages of staff appear to be those with technical and engineering skills, more so than even IT and accounting skills. 20% of employers who have experienced difficulties recruiting skilled staff highlighted technical and engineering vacancies as being particularly difficult to fill, compared with 19% claiming problems with IT recruitment and 16% with accountancy. This is a significant change since the last Skills Index in October 2000 where accountancy was identified as the top skills shortage.

James Reed, chief executive of Reed, comments: Skills shortages are now the number one concern of business leaders. Successful companies are increasingly committed to training and succession planning, but must be imaginative in their use of recruitment techniques and staff retention policies, if they are to bridge the gap.

The Government also has a role to play. An extension to policies that help bring unemployed people into the workforce will be critical. However, as we move towards full employment, a loosening of labour market regulations will also be fundamental if businesses are to thrive. A flexible labour market, where talent is both mobile and well rewarded is central to our future economic success.