Last reviewed 23 August 2021

A survey of over 700 directors shows that 44% of businesses are currently experiencing staff shortages and this risks undermining the recovery and stoking emerging inflationary pressures, the Institute of Directors (IoD) has argued.

Of those responding to its survey, most are finding that the most challenging roles to recruit are in the “professionals” and “associate professionals” categories — although “skilled tradespeople” are also much in demand.

The sector worst hit by staff shortages is hospitality.

The IoD highlights that 65% attribute worker shortages to the UK’s long-term skills gap, whilst 40% are struggling with a lack of potential workers from the EU and 21% state that these shortages are due to staff having to isolate.

A similar proportion — one in five — report that furloughed or inactive staff are reluctant to return to the workforce at the current time.

These pressures are also affecting the salary costs facing business with half of those reporting staff shortages also mentioning increases in wage costs in excess of 5%.

Senior Policy Advisor at the IoD, Joe Fitzsimons, said: “Although there is light at the end of the tunnel, with Covid restrictions continuing to ease, businesses are still relying on the Government to address the ongoing challenges within the labour market. There are actions it should take in the immediate term, although it must not neglect the longer-term skills gaps employers are facing”.

The IoD’s proposals

The Institute is calling on the Government to:

  • extend the Kickstart Scheme beyond 2021, and invest in the Knowledge Transfer Partnership scheme to allow SMEs to access university talent

  • suspend the Immigration Skills Charge for small businesses and explore other ways of easing immigration restrictions (81% of directors would support loosening immigration requirements as a way of easing the pressures on the labour market)

  • temporarily slash non-wage costs such as employers' NICs — for example by raising the employment allowance, for start-ups and the hospitality sector in particular

  • encourage investment in training by creating a new temporary tax incentive to support spending on retraining, technology, and green growth, or widen R&D tax reliefs to include these.