Amid recession fears and a slowdown in economic activity, companies and organisations in the United Kingdom are struggling to find top talent to fill their vacancies.

In fact, the British Chambers of Commerce’s Quarterly Recruitment Outlook reveals that Q4 2022 was characterised by the highest levels of recruitment difficulties on record. Over eight in ten (82%) firms and small businesses have reported challenges in finding skilled and semi-skilled workers, leading to lost productivity and increased costs for talent acquisition.

If these job vacancies continue to be left unfilled, it will paint a grim picture for the growth of businesses and the UK’s economic recovery. But there needs to be a closer look at labour market shortages and the factors contributing to them before businesses can come up with potential solutions.

What the numbers say

Findings from the same survey by the BCC indicate that despite all sectors facing recruitment challenges, the problem is particularly acute in specific industries. The hospitality sector reported the highest percentage (87%) of firms struggling to recruit, closely followed by the manufacturing sector (85%). Other sectors that were most affected were construction, professional services, public, education, and health, which were all at 83%.

Meanwhile, the latest data from the UK Parliament’s report on skills and labour shortages show that the economy may be taking steps towards post-pandemic recovery, but job vacancies remain particularly high. Towards the end of 2022, there were 1.19 million vacancies in the UK and 1.27 million unemployed people.

When the demand for labour far outpaces supply, it can also limit the potential of emerging industries, of which the financial technology sector is one example. The sector has seen a 182% increase in tech job growth in the past year. But its growth potential will depend on whether or not it can attract highly skilled tech talent in an already competitive labour market.

Factors contributing to the talent shortage

There are several factors that contribute to the continuing talent shortage in the UK. For one, labour demand — measured by the number of people in the workforce and the number of jobs available — has recovered at a faster rate than labour supply since the pandemic, based on the Bank of England’s Monetary Policy Report in 2022.

Another factor is the post-Brexit immigration system. There are many sectors, especially low-skilled ones like retail and manufacturing, which are heavily dependent on the labour of foreign workers. But limiting the flow of foreign workers from other EU countries through the points-based system has led to a disproportionately large shortfall of the workforce in such sectors.

Other pre-pandemic factors that have been linked to the shortage of skilled workers are the lack of investment in training and educational programmes, a mismatch between in-demand skills and the ones that the current workforce possesses, and a rapidly ageing workforce.

Possible solutions for employers

The nationwide recruitment problem requires concerted efforts, primarily from the public and private sectors. The government can implement policies that can attract more individuals to participate in the labour force, such as raising wages and increasing health and childcare benefits.

Meanwhile, employers can turn to firms with recruitment and hiring solutions to help them to tap into a diverse talent pool and attract in-demand candidates through innovative hiring practices and screening methods. Outsourcing talent acquisition efforts also paves the way for meeting various talent needs, from full-time direct hires to seasonal contract staff and interim professionals.

Within Manchester, the skills shortage across various industries is being approached through a digital transformation. Digital hiring marketplace Orka Works has partnered with US software giant TEAM Software by WorkWave in order to directly connect industries with high vacancies to a pool of over 65,000 flexible workers. This increases job opportunities in the area while reducing administrative costs and workload for a number of employers.