Too few skills, low productivity bedevil UK economy

Two problems persistently undermining economic growth in the UK – skills shortages and poor productivity – have been highlighted in two new studies.

Too few skills, low productivity bedevil UK economy
Research by the Recruitment and Employment Confederation shows continuing shortages in a range of disciplines, including accountancy, project management, nursing, quantity surveying, engineering and sales.Meanwhile, data from the Office for National Statistics (ONS) showed that UK productivity fell by 1.2 per cent in the final quarter of last year with output per hour in the manufacturing sector now 0.7 per cent lower than it was in 2010.Low productivity has bedevilled many sectors of British industry for years, with the UK having the lowest rate of any G7 nation with the exception of Japan.In a separate report on Friday, the ONS said the UK's trade deficit narrowed in February to £4.8 billion from £5.2 billion in January, but revealed that industrial output had fallen by 0.3 per cent month-on-month."Chancellor George Osborne will have been expecting a slight drop in today's manufacturing production figures, especially amid the furore of steel giant Tata signalling their intention to close their Port Talbot plant, but the severity of the fall will have been surprising," said Dennis de Jong, managing director at UFX.com."Global steel prices isn't the only issue hurting manufacturing production. The rapidly approaching Brexit referendum is on a knife edge and, with the outcome uncertain, it may cause orders to dry up until the votes are counted."James Sproule, chief economist at the Institute of Directors, said: "The drop in UK productivity is not welcome, but nor is it particularly surprising given the continued strong performance in employment growth.""More jobs are clearly a good thing for the people who get them, but much of the increase in employment in 2015 came in areas like accommodation and food services, which add little to the productivity statistics.""The rise in wages, outpacing productivity, in the final quarter of last year is likely to help to underpin the consumer-led portion of the economic recovery. However, the introduction of the national living wage, raising pay for 1.8 million workers, will very likely result in continuing poor performance in productivity in 2016."John McDonnell, the Labour Party's shadow chancellor of the exchequer, said, "Latest productivity figures showing the largest quarterly fall since 2008 are deeply concerning. It comes only weeks after the Office for Budget Responsibility revised down forecasts for growth due to weak productivity expectations throughout this Parliament.""George Osborne has been chancellor for six years now and has made almost no progress with what may be the biggest challenge facing Britain's economy. It's about time he listened to the coalition of voices calling for more investment in infrastructure, to boost productivity, as well as addressing the skills shortage which is being reported by employers across the economy."The skills shortage resulted in a fall in March in the availability of staff to fill vacancies, especially for permanent posts.Tom Hadley, director of policy at the Recruitment and Employment Confederation, said, "Over the last quarter, permanent hiring has continued to grow, but the rate eased in March to the slowest since September 2015. While we expect jobs growth to continue overall, we are now seeing the effects of current uncertainty in the marketplace on UK employment.""Global economic headwinds plus uncertainty around a possible Brexit make it likely that slower growth in permanent hiring will remain over the next few months as employers take a wait-and-see approach.""In contrast, temporary hiring is on the up as businesses seek to meet increasing demand while retaining the ability to react quickly to any threats that might be around the corner."A spokesman for the Department for Business, Innovation and Skills said: "We are putting employers in the driving seat so they have the power to develop apprenticeships that meet the skills they need now and in the future. ""Apprenticeships are helping to open the doors for people to get on. Our reforms are helping more and more people into work than ever before."

For more Re:locate news and features on talent management, click here and for more on human resources, click here

Related Articles