Skill shortages threatening to jeopardise ‘remarkable turnaround’, Business West survey shows

June 28, 2021

West of England business’s confidence in the economy has bounced back for the first time in four years, according to a new survey, but there are growing fears that the recovery will be choked off by a lack of skilled workers.

The latest quarterly economic survey conducted by Business West, the region’s largest business group which runs the Swindon & Wiltshire Initiative, shows that 42% of firms said demand for their products and services had grown, with orders following the same path. 

Net domestic sales were also in positive territory for the first time in a year, the survey results reveal, as firms reported growing confidence in their own business prospects.  

Nearly half of all businesses felt that the prospects for the UK economy were positive, and an even higher proportion (68%) said that they were feeling confident or very confident about their own business’ prospects over the next 12 months.

However, export sales and orders were still being dragged down by Brexit related-issues and international travel restrictions.  

The 400-plus businesses that responded to the survey also said the gradual unlocking of the UK economy had led to an uptick in the jobs market – with 45% of all business quizzed trying to recruit staff during the past three months and 62% reporting problems in finding the right skills to grow.  

Business West said the results were collected before the government announced a four-week delay to the roadmap for lifting remaining restrictions, which may have had an impact on sentiment.

Business West managing director Phil Smith, pictured, said: “After 15 months in the doldrums, finally we have some positive news to report, with renewed optimism in the South West economy.  

“This is quite a remarkable turnaround from the height of the pandemic when South West business confidence was at its lowest ebb.  

“The sudden resurgence of business activity has meant that businesses who need to recruit are confronted by in a tight labour market, especially for skilled staff.”

He said the challenge for many businesses, which could constrain the region’s recovery, was to recruit and retain staff.

Jim Roach, managing director of ARV Solutions – a Bristol recruitment firm specialising in the construction industry – blamed Brexit for the labour market challenges faced by West of England businesses.

“The lack of skilled people wanting to, or being able to, work in the UK from abroad is a source of concern for us,” he said.  

The apparent mismatch between labour supply and demand in sectors, including personal care and construction, coupled with the rush to recruit skilled workers, had led to fierce competition for hires and appears to be pushing up wage demands according to business owners, he added.

The spectre of higher inflation was also highlighted by the survey results with businesses across the board reporting increases in their input costs, especially related to logistics and transportation costs and in particular raw materials.

Some 31% of businesses had, in turn, increased their prices – with proportion is higher still in the manufacturing sector, where 40% said they had put them up.

A further 35% of businesses plan to increase their prices in the coming quarter.  

The survey also revealed that, at a time of unprecedented change, 70% of businesses considered climate change an issue affecting them, with 45% implementing plans to reduce their environmental impact and  31% having taken some steps but admitting they could do more.

Nearly half of businesses also plan to take action to reduce their carbon emissions or environmental impacts in the next 12 months, with electric vehicles, reduced business travel, and investment in solar power being the most common priorities.  

The biggest drivers of these changes were the values of the business owner, the expectations of clients and the opportunity to win new customers.

Mr Smith added: “At a busy time for many of the region’s businesses it is pleasing to see that the majority recognise the threats and opportunities presented by climate change, but with many adaptations and investment needed now there are concerns about how these will be funded in the short term.”  

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