Britain’s manufacturers are facing the biggest shortage of skilled workers since 1989 amid record levels of UK employment and falling numbers of EU27 nationals coming to the country to work since the Brexit vote.
The British Chambers of Commerce (BCC) said more than four-fifths of manufacturers struggled to hire the right staff in the final months of 2018.
In a survey of more than 6,000 employers across the country, the lobby group found 81% of manufacturers and 70% of service sector firms reported difficulties with finding staff with the right qualifications and experience.
Adam Marshall, the director general of the BCC, said the government urgently needed to recognise the magnitude of the recruitment difficulties firms faced as ministers prepared to introduce restrictions on EU nationals working in the UK after Brexit.
Sajid Javid, the home secretary, is looking to cut immigration from the EU by 80% after Britain leaves, including through the extension of a £30,000-a-year minimum salary threshold already applied to non-EU workers.
Marshall said: “Business concerns about the government’s recent blueprint for future immigration rules must be taken seriously – and companies must be able to access skills at all levels without heavy costs or bureaucracy.”
The recruitment difficulties come as the UK employment rate stands at the highest level since 1971, while unemployment is at its lowest since 1975, making it harder for companies to hire new workers without offering higher wages.
Net migration from the rest of EU to the UK has also slumped to a six-year low. The weaker pound has made it less attractive for foreign nationals to come to Britain to work, while Brexit has also raised the prospect of tougher immigration rules in future.
The BCC said the economy also appeared to be “stuck in a weak holding pattern” at the start of the year owing to Brexit uncertainty, with companies reporting stagnant levels of growth and faltering business confidence.
While manufacturers are coming under pressure from labour shortages, the service sector, which includes banks, hotels and restaurants, and accounts for about four-fifths of the economy, reported weaker domestic sales.
Production in the manufacturing sector hit its fastest pace of growth in six months in December as firms stockpiled in preparation for potential border holdups in the event of a no-deal Brexit.
The IHS Markit/Cips manufacturing purchasing managers’ index rose from 53.6 in November to 54.2 last month, beating all forecasts in a Reuters poll of economists. Above 50 indicates economic growth.
The latest snapshot raises the prospect that Brexit uncertainty may perversely benefit the economy in the short-term by prompting companies to raise their activity levels in preparation for potential disruption from the UK leaving the EU on 29 March without a deal.
The Bank of England has previously said that the majority of businesses in Britain have done little to prepare for a no-deal scenario, while the government has started to tell more companies to make preparations as it steps up its plans.
Economists, however, said the growth in activity was likely to be temporary. Disruption after 29 March could curtail activity, while any removal of Brexit risks could lead businesses to run down their stockpiled goods rather than placing new orders.