Skills shortages highlighted by Quarterly Economic Survey
Skills shortages facing employers throughout Warwickshire were brought into sharp focus by findings of the latest regional Quarterly Economic Survey. Sam Van de Schootbrugge, from Warwickshire County's Council's Economy & Skills Office, reports.
The Quarterly Economic Survey (QES) is a national survey of businesses which informs government and policy-makers about developments in the economy.
It is widely understood that the changes in business confidence and expectations in the QES precede changes in the economy. As such, this well-regarded survey is used as a key tool for the Bank of England, the European Commission and HM Treasury.
The Coventry and Warwickshire Chamber of Commerce undertake the QES fieldwork for the LEP area. In conjunction with Warwickshire County Council, the results are then analysed and presented at the Chamber of Commerce’s Economic Outlook Breakfast Event.
In quarter three, questions in the QES focused on skills shortages. With the unemployment rate at a record low across the country, it is becoming increasingly difficult for businesses to attract workers with the right skills. The survey enables us to understand the extent of a skills shortage locally, why businesses believe there is a shortage of skills and what alternatives they are considering. The analysis helps inform local policy makers, enabling targeted-policy implementation that can ease skills pressures.
Key headlines from the full report: (https://www.warwickshire.gov.uk/economicassessment):
- Over the last three months, more than three in four businesses have looked to recruit. Of those looking to recruit, 70% believe that recruitment difficulties are attributable to a skills shortage. Of these, 44% considered a lack of workers the biggest reason for a skills shortage.
- Regardless of recruitment decisions, 62% of businesses currently believe their firm is suffering from a skills shortage. Micro businesses, employing fewer than 10 people, believed competition for workers with the right skills was the biggest reason for their business facing a skills shortfall. These firms were also least likely to be able to afford to employ people with the right skills.
- The survey also shows that 80% of all businesses facing a skills shortage are implementing a pay rise in the next 12 months. This proportion increases to 87% if we focus on businesses employing 10 or more people. This means as many as 315,000 workers in Coventry and Warwickshire are set for a pay rise in the next 12 months. Those in the construction, consumer services and transport & distribution sectors are most likely to receive a pay rise over the next 12 months, whereas those in the retail, public and creative sectors are least likely.
- Almost one in two (45%) businesses in the sample are implementing a pay rise to retain current employees. These types of businesses were also more likely to quote a ‘lack of workers’ as the reason for a skills shortage.
- We conclude that pay increases in Coventry and Warwickshire over the next 12 months will most likely be borne out of a skills shortage, rather than inflation. This is an important finding coming out of the survey.
- On average, 57% of businesses in the sample are looking to increase non-wage related pay over the next 12 months. Large businesses are most likely to increase non-wage related pay in the next 12 months. Micro businesses are most inclined to increase annual leave entitlement. Medium-sized businesses are most comfortable with increasing training/development opportunities, whereas large businesses are looking to offer more employee benefit schemes incentives.
- Overall, seven in 10 businesses will implement either a pay or non-wage related pay increase over the next 12 months. This figure increases to 85% of businesses if we exclude micro-sized businesses, and could cover up to 78% of Coventry and Warwickshire’s workforce.
- A third of businesses have considered both apprenticeships and graduates, and retraining existing employees. These options are particularly popular for large- and medium-sized firms, with 86% of large firms using apprenticeships and graduates, and 68% of medium-sized firms retraining existing employees. Overseas labour is the least popular selection, although 1 in 5 large businesses still find this an important option. Recruitment outside of the workforce, which includes those with physical and learning disabilities, is more popular in the manufacturing service – 46% compared to 23% of services sector businesses.
- More than one in two micro-sized businesses are not considering labour force alternatives. These businesses account for 75% of total businesses in Coventry and Warwickshire and gives a clear direction for the types of businesses that need skills support. Although a number of micro-sized businesses may feel as if they do not need to consider alternatives if they are not facing a skills shortage, there is still a much larger-than-average proportion who are not considering alternatives despite facing a skills shortage. That would suggest that the reason for not looking towards alternative labour force options is capacity.
The next quarterly economic survey will be available from 23rd October to 21st November 2017. The questions focus on the expected impact of Brexit and an interest rate rise on investment in innovation. The analysis of these questions will be available in December.
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