Our clients are kept up at night by the difficulty they are having recruiting skilled professionals and and they are not alone. Business in London and across the UK is concerned about the shortage of skilled talent and the impact this deficit will have on economic growth. The latest CBI/Pearson London survey found that half of businesses in London are concerned about the shortage of skilled talent and the impact this deficit will have on economic growth. The Deloitte Finance Director Survey 2015 Q2 found that the primary issue for CFOs in the UK is expansion and driving new products coupled with a high expectation for hiring. Skilled labour is in short supply.
It has been almost two decades since McKinsey coined the term ‘War for Talent’ and much has changed on the global landscape. Yet, as business growth picks up in spite of continuing debt burdens in the West and slowing growth in emerging markets, the ‘War for Talent’ is as rife as ever. In the UK in particular, the skills gap is biting in key sectors that rely heavily on knowledge workers such as financial and professional services, technology, education and the creative industries.
A recent article in the Harvard Business Review (https://hbr.org/2014/08/employers-arent-just-whining-the-skills-gap-is-real/) points out that it is difficult to measure exactly what a skills gap is and hence to manage it. James Bessen states that the global skills gap is not necessarily related to education. On the contrary, there is a good supply of educated candidates. The difficulty is finding candidates who have the skills to work with today’s rapidly changing technologies. Take the highly regulated world of financial services as an example. Even at the CRO level, many global investment banks have not yet fully understood or even begun to deal with the risks of new regulations like FRTB. Hiring teams to implement these changes is a real challenge as the regulatory and technological skills in demand are just not there.
The reasons for the skills gap are myriad and complex. The financial crisis in 2008 and subsequent years of recession and economic slack has impacted the size and availability of the skilled talent pool needed for the current wave of growth. A large pool of highly talented, employed individuals have missed out on a decade of stretching assignments and lack the experience necessary to take on senior leadership roles. Many of these individuals, heading into mid-career, have adjusted their ambitions in line with a ‘new normal’ at work. Forced by circumstances to make lifestyle changes and meander along the career path, these candidates are reluctant to make the sacrifices necessary now to develop skills to climb the next rung on the corporate ladder.
A change in immigration policy and the visa system in the UK has limited business’ ability to hire skills from abroad. Changes to the visa system were made during the last parliament as the government sought to decrease immigration into the UK. A recovering economy in 2015 has seen an increase in hiring for skilled labour from abroad and the quota caps were hit for the first time in Q2 2015. Business has petitioned government to remove these caps but David Cameron remains defiant stating that business should do more to train UK citizens. He may have a point but the investment required to cultivate a pool of skilled labour required takes time. Also, SMEs, employing half of UK private sector workers, do not have the resources to fund training. We could look to the EU for skilled labour and it is true that there has been a net gain of immigrants from the EU. However, most EU immigrants entering the UK over the last decade are unskilled or low skilled and do not plug this crucial gap.
The Deloitte Global Human Capital Trends 2015 reported that the key trends for businesses and HR for this year is the difficulty in developing leadership at all levels and developing a culture that engages with employees. Cultural engagement is imperative to both recruiting, retaining and developing leadership talent but it is a bit like the chicken and the egg. Cultural engagement is driven by a company’s leadership and if that isn’t strengthened or is a vacuum, recruitment and retention and development of internal talent cannot happen.
Multinational organisations have the advantage of being able to relocate roles to any geography outside the UK and can tap a larger, mobile candidate population. Home-grown and start up businesses, particularly in fledgling technology and fintech companies, require workers to be UK based. Consideration needs to be given to what that means for UK competitiveness and how we foster entrepreneurial enterprises competing on a global field. Britain has seen an influx of venture capital into new technology businesses this year, but if we cannot grow these companies investment will flow to the geographies where talent resides .
An underlying risk aversion on the part of both candidate and client is also influencing the recruitment process. This is a remnant of economic instability and job insecurity during and following the 2008 financial crisis and is exacerbated by current market uncertainties. At many large companies, vendor management maintain a firm grip on hiring decisions limiting overtures to avoid excessive measures to compete for talent. Some have not adapted to the change in tide and behave as if the supply of skilled candidates is unlimited. In fact, for skilled labour, it is a candidate market and businesses will need to change strategy to hire for success.
Finally, it is thought that efficiencies driven by technology will increase the need for highly skilled labour during the next five years. As we enter a new wave of technological change and computers increasingly perform low skilled tasks and jobs, the war for skilled labour with technology know-how will be relentless. Both government policy and business will need to do what it takes to stay ahead of the talent curve.