We are all sick and tired of this conversation by now, so I’ll make this short and sweet (hmmm…. Maybe not so sweet). So now that the dust has settled what can we expect the impact of Brexit to have on the U.K. jobs market?
I’m going to steer intentionally away from the hyperbole here, as we’ve all heard way too much of that, and just focus on the raw facts. As someone with an Economics and stats background I like facts… (less sniggers in the back row please).
Let’s examine the bare facts behind this impending skills crisis:
- UK job vacancies have increased 42% since 2013. Well, in the HRO world, we often speak about the mythical skills shortage. But what is the real situation in the U.K.? The revival of the economy, since the dark days of 2008, has created an obvious uplift in job vacancies. The UKCES Employer Skills Survey 2015 states that in 2015 there were 900,000 job vacancies in the U.K. (up from 600,000 in 2013), this 2015 figure represents 3.3% of total employment in the U.K. and indicates a considerable 42% increase compared to the number of vacancies reported in 2013. In addition, the percentage of organizations with vacancies has increased from 15% in 2013 to 19% in 2015.
- Low growth in EU migrant workers moving to the UK. In the most recent ONS survey (U.K Labour Market: June 2016) we can see that at present we have 2.15 million EU nationals working in the U.K., this has grown from less than 500,000 in 2000 (year on year CAGR of 10%).
So from these figures it is plain to see that, yes there is a skills shortage and even with EU nationals “flooding” our borders and accounting for around 7.8% of the U. K’s workforce, there is still an increasing number of vacancies struggling to be filled.
So yes, right now the data would indicate that the U.K. is in desperate need for more talent and if that talent comes over from the EU, great.
In the short-to-medium term, the outlook for the UK skills market is bleak
Firstly, potential candidates from the EU looking to enter the U.K. will be discouraged by the uncertainty of free passage and working rights in the U.K, coupled with the lower real earnings in their home currency, due to reductions in the GBP/Euro exchange rate. Given the stated skills deficiency and the significant role EU migrants play, in the U.K. job markets, this is a less than ideal scenario.
In the long term, interest rates cuts, due to currency devaluation, should more than mitigate the potential fallout from Brexit and stimulate the U.K. economy. Now I know I’m getting dangerously close to the “what if” and deviating from the “hard facts”, but the empirical evidence of interest rate reduction effect on the U.K economy has been born out post the 2008 recession. This stimulus should further exacerbate the skills shortage already in place.
The Bottom-line: The immediate impacts of Brexit on the UK talent gap are all negative, however, with change often comes new opportunity
So where does this leave the U.K? Well, as can be seen from the evidence, the EU was contributing a significant amount of talent to the U.K. market, but even with this inflow it has still been insufficient to fill demand. Stifling EU talent inflow is only going to exacerbate the issue thereby leading to drastic measures whereby the government might be forced to falsely boost the U.K. job market through fiscal incentive. This represents a situation that no one, least of all, U.K. tax payers would appreciate.
Right now it would seem that to fill this skills gap the U.K. has to look further afield than the EU. Given the freedom Brexit would give the U.K. there could now be the opportunity for freer movement agreements with other English speaking nations including the U.S, Australia, Singapore, South Africa and India. Positively, within all these nations there is a substantial mix of both low, medium and high end talent available, the challenge lies in selling this to the U.K. public who have largely voted to leave the EU due to immigration concerns.
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