UK labour shortages may cost economy £30bn a year, REC says

‘Labour shortages have the power to bring segments of the UK economy to their knees,’ said Neil Carberry.
Image: Simon Dawson/Bloomberg

Labour shortages in the UK could cost the economy £30 billion ($35 billion) a year, a prominent jobs consultant said, putting pressure on the government to boost the workforce.

The Recruitment and Employment Confederation said a 10% surge in demand in the economy coupled with shortages like the ones the UK is now suffering could shave as much as 1.6% off gross domestic product by 2027.

The analysis helps explain the volatility hitting the UK economy now, with companies struggling to hire staff needed to cope with the jump in business accompanying the end of coronavirus lockdowns. REC said the scale of the potential hit is about the same as what the UK spends on defense every year — or double the cost of the new Elizabeth line on the London Underground.

“Labour shortages have the power to bring segments of the UK economy to their knees,” said Neil Carberry, chief executive officer of REC. “Government needs to create the environment for businesses to be able to invest and thrive.”

The industry group urged ministers to develop an immigration policy that would allow in workers as well as ways to bring more people who fell out of the workforce in the pandemic back into jobs.

Britain is leading much of the world when it comes to people dropping out of the workforce, not filling jobs despite vacancies hitting a record high.

Last month, there were 360 000 fewer people reported in work than before Covid hit in February 2020. That’s due in part to a 450 000 jump in inactivity for those under 65 who neither have nor want a job.

© 2022 Bloomberg

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