The Institute of Directors has welcomed another month of strong employment and wage growth, saying that the high number of firms who were still looking for staff shows that employment should remain high, despite uncertainties in the global economy, but firms will continue to feel the pinch of the skills shortage in 2016.
Michael Martins, Economist at the Institute of Directors said:
These jobs figures, which show the British labour market ended 2015 strongly, could be just what the doctor ordered as we see nothing but storm clouds gathering across the global economy. At home, British firms remain upbeat, creating jobs, and pushing both the absolute number of people and the employment rate to its highest level since records began.
We also have the lowest jobseekers-to-vacancies ratio since the beginning of 2005, with firms still hunting for skilled employees. While this is clearly good news and the increasing number of vacancies means that the unemployment rate could continue to drop, addressing the skills gap takes on a fresh importance. For small firms that employ fewer than ten employees, the struggle to find workers is particularly acute, with vacancies rising by 13.1 per cent in the last quarter.
Wage growth, too, has remained strong in real terms at around 2 per cent, as the competition for talent intensifies. In sectors like construction, where wages have increased by more than 6 per cent, the lack of skilled workers is clearly acute. Corporate performance has been strong in recent years, but being able to plug vacancies is critical to ensuring this continues in 2016. This is another reason why employers hope the government will not follow through on suggestions to restrict skilled migration from outside the EU, especially as the monthly quota for Tier 2 visas has been shown to be inadequate in addressing skill shortages.