UK businesses have been warned the staff shortages which are impacting on the supply chain are set to continue for the next two years.

Tony Danker, (pic) director general of the Confederation of British Industry (CBI) warned that labour supply problems could last for up to two years and will not be solved by the end of the Job Retention Scheme.

He cautioned while a lack of HGV drivers has dominated the headlines, the challenge extends well beyond to include other skilled professions, and along with resulting disruption to supply chains, has led to increasing calls for action in the run up to Christmas.

In a message to the UK government Danker said “standing firm and waiting for shortages to solve themselves is not the way to run an economy. We need to simultaneously address short-term economic needs and long-term economic reform”.

The CBI’s labour market intelligence report released yesterday uses data from the business group’s recent economic surveys and deep member consultation, which pointed to labour shortages as a growing constraint on business’ plans to invest in the year ahead. Kick-starting business investment is essential for a sustainable economic recovery.

Introducing the CBI’s labour market insights, Danker said: “Labour shortages are biting right across the economy. While the CBI and other economists still predict growth returning to pre-pandemic levels later this year, furlough ending is not the panacea some people think will magically fill labour supply gaps. These shortages are already affecting business operations and will have a negative impact on the UK’s economic recovery.

“Other European countries are also experiencing staffing shortages as their economies bounce back. In the UK, many overseas workers left during the pandemic affecting sectors including hospitality, logistics and food processing. And new immigration rules make replacing those who left more complex.

“Building a more innovative economy – coupled with better training and education – can sustainably improve business performance, wages and living standards. But transformation on this scale requires planning and takes time. The Government’s ambition that the UK economy should become more high-skilled and productive is right. But implying that this can be achieved overnight is simply wrong. And a refusal to deploy temporary and targeted interventions to enable economic recovery is self-defeating.

“The CBI has heard from companies actively cutting capacity because they can’t meet demand, like the hoteliers limiting the number of bookable rooms because they don’t have enough housekeeping staff and can’t get linen laundered. Meanwhile some restaurant owners have had to choose between lunchtime and evening services when trying to make the most of summer.

“It’s also visible to consumers when lead-in times for purchases like kitchens or furniture double.

“Let’s be clear – employers back existing Government schemes to get people back into work. And businesses are already spending significant amounts on training, but that takes time to yield results, and some members suggest it could take two years rather than a couple of months for labour shortages to be fully eliminated.”

Danker added: “Using existing levers at the UK’s control – like placing drivers, welders, butchers and bricklayers on the Shortage Occupation List – could make a real difference. The Government promised an immigration system that would focus on the skills we need rather than unrestrained access to overseas labour. Yet here we have obvious and short-term skilled need but a system that can’t seem to respond.

“Great economies like great businesses can walk and chew gum. We need short-term fixes to spur recovery and long-term reforms to change our economic model.”

“Labour shortages are biting right across the economy. While the CBI and other economists still predict growth returning to pre-pandemic levels later this year, furlough ending is not the panacea some people think will magically fill labour supply gaps. These shortages are already affecting business operations and will have a negative impact on the UK’s economic recovery.”

Tony Danker, CBI

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