A worsening skills shortage could blight hopes that Britain can overcome years of dire productivity performance, potentially denting its economic expansion in future, a report from Hays and consultancy firm Oxford Economics suggested recently.
Productivity outputs have been a big problem for advanced nations ever since the financial crisis and the UK productivity puzzle is something that the government and the Bank of England have been trying to work out along with leading economists. The Telegraph has recently asked, Why the Productivity Puzzle Matters and you can read the full article here.
Skill shortages in Britain worsened for a fourth consecutive year, and now rank among the most severe in Europe, according to the annual Global Skills Index.
The skills shortages have pushed up wage pressures as employers were forced into a "war for talent" in certain industries like engineering and technology.
While the unemployment rate has fallen to levels last seen before the financial crisis and wage growth has started to recover after years of stagnation, Hays warned the skills gap will create problems unless the government takes action soon.
"UK growth prospects are better than they have been in a long time but employers are facing ever-greater challenges around finding the talent they need," said Alistair Cox, chief executive of Hays, which operates in 33 countries. This can only mean that the productivity challenges we face as a nation will become even more severe."
Cox added that better training, attracting highly-skilled workers from overseas and better investment in technology are all part of the solution.
The government unveiled a plan to boost productivity in July, “Fixing the foundations: creating a more prosperous nation”, you can download it here. In it, it sets out a 15 point plan on how to boost UK productivity and one of the points is to train up 3 million apprentices by 2020 to fill the skills gap in areas like engineering.
But many business figures are critical of the government's immigration policy, which they say deters highly-skilled workers from outside the European Union, exacerbating the shortage of skills.
"Let's have some sensibly thought-through migration policies so that we are not closed to business for the very best people," Cox told Reuters.
"Our competition around the world -- Singapore, Australia, Canada -- are saying 'great, if you don't want these people, we welcome them'. And they've designed their visa systems accordingly."
A survey from the Recruitment and Employment Confederation earlier this month showed that job placements had been held up by a lack of skilled candidates.
The Hays survey showed other countries also struggle with a severe mismatch of talent, including Ireland and the United States.
Official figures on British productivity for the second quarter were released today by the Office of National Statistics. They have showed that output per hour grew by 0.9% from the first to the second quarter of 2015 which is the fastest rate in four years. You can read the full report here.
The Bank of England is keeping a close eye on wage growth as it mulls the first rate hike in over seven years. The ongoing productivity puzzle could cast doubt over the central bank's ability to gauge the speed with which pay will rise.
Where are the skills shortages?
According to the Employer Skills Survey (ESS) which interviews more than 90,000 employers and reports every two years, with the latest data referring to 2013; indicates that manufacturing employers were most likely to encounter skills shortages when recruiting (accounting for 30% of hard-to-fill manufacturing vacancies) and that job roles in the skilled trades (plumbers, electricians, technicians et cetera) were particularly likely to be affected.
There were also skills shortages in recruiting professionals and associate professionals and for staff in caring occupations. Recent vacancies data from the ONS indicates the health and social work sector currently accounts for a large number of vacancies, a number that has grown by almost 20% over the past year.