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More Worker Diversification Has Eased Recruitment Concerns for UK Employers

There has been a sharp increase in non-European Union citizens coming to work in the United Kingdom and it has eased employers’ recruitment difficulties for medium and high-skilled roles as a result.

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This is according to the latest quarterly Labour Market Outlook from the Chartered Institute of Personnel and Development (CIPD) and the Adecco Group, which is a survey of 2,104 employers in the UK. 

The research revealed that despite employment growing strongly over the past year, the number of applicants chasing each medium- and high-skilled vacancy has experienced a modest decline compared with the same period last year. However, the number of people applying for low-skilled roles has dropped by a fifth over the past year, suggesting that some employers may face significant recruitment challenges in the coming months.

The survey also shows that the overall fall in the number of applicants is putting upward pay pressure on a significant minority of employers. Median basic pay expectations in the private sector increased to 2.5% from 2% compared to three months ago. Median basic pay award expectations have also risen in the public sector to 1.5% from 1%. Overall, the average basic pay increase remains steady at 2%.

“Amidst the current political uncertainty, the UK labor market is holding up surprisingly well. Labor demand remains strong, and the robust supply of non-EU workers has helped many employers meet this demand; partly owing to the government's decision to remove the migration cap for doctors and nurses,” said Gerwyn Davies, senior labour market adviser for the CIPD. “This has been key to freeing up visa capacity for employers in other sectors who have sensibly been able to resolve skill shortages by hiring non-EU migrants. Looking ahead, the government's post-Brexit immigration policy must demonstrate similar levels of flexibility to ensure that such shortage occupations benefit from a more generous minimum salary threshold.”

Overall, the survey data shows that the supply of labor is constrained compared with previous years, particularly for low-skill vacancies. Where employers last filled a low-skilled vacancy, they received a median number of 16 applicants for that role. This compares with 20 applicants in the summer 2018 report and 24 applicants in the summer 2017 report. This may be partly due to subdued growth in the annual increase in the number of EU-born citizens in employment, which remains well below the pre-referendum average.

In contrast, the supply of medium-skilled and high-skilled applicants has held up relatively well. This can be partly attributed to the sharp increase of 123,000 non-EU citizens in the UK workforce between Q1 2018 and Q1 2019, the majority of which will have been subject to a skills threshold. This compares with a decrease of 6,000 between March 2017 and March 2018 in the number of non-EU citizens in employment in the UK. This increase has been mainly driven by the buoyant recruitment of nurses and medical practitioners, partly following a relaxation to remove doctors and nurses from the government's migration cap in June 2018.

Recruitment
Employment confidence remains robust but saw a modest fall in the last quarter. The report's net employment balance — a measure of the difference between the proportion of employers that expect to increase staff levels and those who expect to decrease staff levels — has fallen from +22 to +18, which is the lowest number recorded since 2017.

Employment confidence is highest in Wales (+29), Scotland (+21) and lowest in the East Midlands (+7) and the East of England (+7). The labor market remains tight, which is putting pressure on employers to increase pay.

Pay Outlook
Of particular note is the increase in the number of employers expecting a basic pay increase of more than 3% in the next year. More than a third of employers (36%) plan to increase basic pay by at least 3% compared to 28% of employers in the same period last year.

The key factors driving pay awards of 2% or more are inflation (43%) and the going rate of pay elsewhere (37%). Recruitment and retention difficulties were also a factor (29%).

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