Strong employment growth triggers prospect of new skills shortages

June 16, 2014

The number of businesses expecting to recruit more staff has almost returned to the pre-recession levels of 2007 new figures released today show.

But while the data is welcome news for job seekers, some business analysts are warning that it could signal looming skills shortages.

The latest Business Trends report by accountants and business advisers BDO, which includes an employment index charting hiring intentions, shows firms are increasingly expecting to add to their workforce.

The index jumped from a measure of 105.6 in April to 107.7 last month – only just below the previous peak in Business Trends’ 22 year history of 108.9 in February 2007 and well above the long-term average rate.

However, some commentators fear strong growth among UK manufacturers in particular could be at risk as a result of the sharp growth in employment.

BDO’s Manufacturing Optimism sub-index, which gauges manufacturers’ growth expectations over the next six months, rose to 121.0 in May, well above the 100 mark that reflects long-run average growth.

BDO partner and head of its South West office, Graham Randall, pictured, said: “Businesses are translating their confidence in economic recovery into action, demonstrated by the sustained increase in hiring expectations. But a gap between supply and demand for skilled workers is developing, which could take the momentum out of the recovery.”

The BDO Output Index, which predicts businesses’ growth expectations over the next three months, rose from 103.0 in April to 103.3 in May, just short of its May 2006 peak of 103.6. The Manufacturing sub-index again outperformed that of the services sector – as it has done every month this year – although both sectors expect output to expand above the long-term growth rate, pointing towards continued improvement in the economy in the coming months.

Mr Randall continued: “With manufacturing growth slowing across the Eurozone and unemployment levels remaining high, we have a ready pool of able workers on our doorstep. Politicians must take this into consideration when planning any changes to immigration policy.”

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