Brexit impact on workforce trends

Since the EU Referendum vote in June 2016, the CIPD’s Labour Market Outlook and Resource and Talent Planning surveys have closely monitored the impact of Brexit on employment and workforce trends, as well as market perspectives and expectations. The following digest is compiled from our most recent data and analysis to help employers remain alert to potential changes and sustain their ability to attract and retain people best-suited to their needs.

Overall employment

Despite early concerns about Brexit’s implications on employment — as emphasised by a sharp drop in the net employment score immediately after the referendum vote — the proportion of employers looking to increase staff versus those looking to reduce staff has recovered strongly and remains around pre-vote levels. This indicator of continued, robust labour demand is consistent with official employment data evidencing high employment.

Impact on recruitment

In the period since June 2016, the combination of strong labour demand, low unemployment and a dramatic 95% fall in EU nationals joining the UK workforce between Q1 2018 and Q1 2016, has put significant pressure on recruitment. The Autumn 2018 Labour Market Outlook found that 44% of employers experienced greater difficulty in recruitment during 2018, and another 34% faced a similar challenge in retaining staff.

As of Summer 2019, employers are still experiencing a high proportion of hard-to-fill vacancies. Of organisations advertising vacancies, 67% reported they were having difficulty in filling at least some of these. This is compared to 51% during Spring 2017.

On the supply side, the Resourcing and Talent Planning Survey 2017 reported that around one-fifth of organisations saw an increased cautiousness in prospective candidates since the referendum vote. Three-fifths anticipated they would face increased difficulty in recruiting senior and skilled/technical employees in the next few years, while two-fifths expect the same in recruiting operational staff.

These expectations have been met with labour market evidence showing that the median number of applicants per vacancy across all skill levels has fallen significantly. For each low-skilled role, the number of applicants have fallen from 24 in Summer 2017, to 20 a year later, and 16 in Summer 2019. For medium-skilled roles, applications have fallen from 19 to just 10 in Summer 2019, and for high-skilled vacancies from 8 to 5 during the same period.

Employing EU migrant workers

Given the shrinking supply of skills and labour, Brexit has not dampened employers’ interest in employing EU migrant workers. At the beginning of 2018, some two-thirds of organisations said they would continue to employ EU nationals. Whilst in 2017, CIPD research found that the proportion of employers who intended to recruit EU migrants was largely the same as the proportion doing so in 2016, across all sectors.

The most common reason given by employers as to why they employ EU workers is that they do not consider nationality when hiring, but simply choose the best person for the job. For semi-skilled or unskilled roles, the main reason given was that employers could not find domestic applicants to fill those vacancies.

Ahead of the introduction of new migration restrictions in 2021, employers will need to ensure they have made the necessary preparations to ensure they continue to have access to the skills their business needs.

Effect on job security

Of the large proportion of employers who employ EU nationals, around half (48%) reported an increase in their EU workforce expressing insecurity (Autumn 2018) about their jobs as a result of Brexit. Interestingly, this insecurity was shared by UK citizens at more than a quarter (26%) of organisations. Publication of the EU Settlement Scheme has gone some way to reassure EU workers, but only 28% of employers said it has helped their confidence in retaining EU nationals over the next two years.

Addressing recruitment difficulties

In response to recruitment challenges, over half of organisations in the Summer 2019 LMO survey raised starting salaries (52%). And of employers experiencing increased difficulty in retaining staff, 33% increased salaries in response. Upskilling existing employees to fill hard-to-fill positions was the most popular option to address recruitment difficulties amongst respondents to the 2017 Resource and Talent Planning survey.

However, apart from increasing salaries to attract staff, employers can introduce more inclusive recruitment practices, build on their employee offer through non-financial benefits or enhance their brand. These will not only address hiring difficulties in the short term but make their organisations more attractive as an employer in the long run. Likewise, measures such as the provision of flexible working and clear career development will help organisations both recruit and retain the people and skills they need.

Workforce planning and development

The scarcity of available skills and labour, potentially exacerbated by further reductions post-Brexit once free movement comes to an end, means workforce planning and development should become a priority. However, some 52% of private sector and 38% of public sector organisations responding to our Summer 2018 labour market survey said they were only just planning to upskill their existing workforce to address the potential skills shortage. To be able to respond in due time, employers need to assign greater urgency to undertake strategic workforce planning that will help identify the skills and knowledge required now and for the future, which in turn will help to narrow down the focus of the learning and development required.

Statistics from early 2018 showed that while 72% of employers have a dedicated training budget, growth in this area was comparatively slow. More than half (55%) said that leaving the EU has had no impact on their training and skills development investment, while 20% said it had caused them to reduce it. This shows that some employers are dialling back on development and training, at the very time they should be investing heavily to mitigate against the real risk of the current skills shortage worsening post-Brexit.

Interestingly, organisations that employ EU nationals were significantly more likely than employers that don’t recruit EU nationals to be investing in training and seeking to recruit from a wider range of under-represented or disadvantaged groups, such as older workers or those from minority ethnic backgrounds. This strongly indicates that organisations which employ EU migrants were typically doing so as part of wider efforts to find the labour they require and to build workforce skills, not because they were failing to invest in UK-born workers or looking to cut costs.


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