- Retirement, sickness and immigration is fuelling staff shortages
- Some businesses could stand to benefit
Companies in sectors such as hospitality and farming are facing “acute labour shortages” following an exodus of EU nationals, a Lords committee has warned.
Since Brexit, the UK immigration system has prioritised skilled workers, meaning there are more migrants in professional roles. However, the House of Lords economic affairs committee said this had contributed to a “mismatch within the labour force”, affecting industries that are reliant on low-paid staff. While sectors such as finance and insurance are advertising fewer jobs than the national average, agriculture and hospitality are struggling to recruit, according to Glassdoor.
Witnesses for the report argued that this would eventually result in more automation, or in businesses closing and affected industries shrinking. “We recommend that the government considers... which combination of these outcomes is likely to materialise; and whether any of those scenarios would elicit concern and a policy response,” the committee said.
Winners and losers
The impact of shortages is evident at a company level. Pork and poultry supplier Cranswick (CWK) has been recruiting butchers from the Philippines this year to fill vacancies, while pub operators JD Wetherspoon (JDW) and Mitchells & Butlers (MAB) have been struggling with rising wages (according to Numis, Wetherspoon’s labour cost-to-sales ratio has jumped from 31 per cent in 2019 to 40 per cent).
However, it is not all bad news for companies – or for investors. Whitbread (WTB), which owns Premier Inn as well as various restaurant chains, said that the operational challenges created by labour shortages and cost inflation could accelerate the decline of the independent hospitality sector, allowing it to expand its own reach. It estimated in October that the total volume of room supply in the UK was 4 per cent lower than it was pre-pandemic, “creating a favourable market backdrop”.
Meanwhile, outsourcers with access to large, flexible groups of workers also stand to benefit. Compass Group (CPG) is one such company. The caterer saw sales jump by 42 per cent in the year to 30 September 2022, and reported a host of new business wins from 'first-time' outsourcers. Its hefty workforce, which can be deployed across the country, is likely to have been a major draw.
Tough times are also helpful for investors wanting to sort the wheat from the chaff. Young & Co’s Brewery (YNGA), for instance, seems to be faring better than many of its peers, increasing its profits and raising its dividend in the six months to 26 September 2022. Back in August 2021, the group cannily devised its own internal recruitment platform, which gives registered employees the power to pick their own working hours. Management said this had opened up a new pool of people, including students, actors and parents, who were unable to commit to permanent employment. If the group’s latest results are anything to go by, this approach seems to be working.
The broader picture
UK job vacancies peaked at 1.3mn earlier this year. While changes in the structure of migration have played a part, the economic affairs committee concluded that, across the UK as a whole, economic inactivity was largely to blame – particularly among 50–64-year-olds.
Contrary to expectations, though, the committee said that long-term sickness was not the biggest contributor to inactivity. “Although the population is getting sicker, much of the rise in sickness-related inactivity is among people who were already inactive, rather than people who were employed becoming inactive due to sickness,” the report said. Instead, people are simply retiring earlier.
This trend is at odds with most other developed countries, which saw inactivity spike during lockdown, then rapidly fall again. However, the committee said that it would be “unwise" to proceed on the basis that a significant proportion of people who have exited the labour force since 2020 would come back, or be persuaded back, by changes in employers’ practices or by policy measures.
Companies seeking young European labour are therefore just the tip of the iceberg.
