Navigating the UK Labour Market - Unemployment, Skills Shortages, and Recruitment Hurdles

The UK labour market is dealing with a mix of challenges at the moment. A growing unemployment rate, huge skills shortages and record job vacancies are causing problems for hiring managers. 

Employment Rates 

Recent data reveals that the unemployment rate has increased to 3.8% during the three months up to February, a rise from the previous 3.7% in the three months before that.  

This uptick in unemployment is due to companies hesitating to hire new employees because of economic concerns, even though there are plenty of job openings, especially in areas like education. 

Interestingly, the employment rate has also grown, reaching 75.8% during the same three-month period, as more people re-enter the workforce due to the ongoing cost-of-living crisis. This has led to an increase in pay, excluding bonuses, although public sector wages continue to grow slower than those in the private sector.  

Consequently, frustrations over pay have contributed to more working days lost because of strikes, with the education sector experiencing the most significant impact. 

Apply Anyway

Another challenge the UK labour market faces is a crisis of "unqualified applicant overload," as a culture of applying for jobs regardless of qualifications has emerged.  

A survey involving over 1,100 recruiters, managers, and HR professionals found that 73% identified a lack of qualified candidates as the most considerable obstacle in their hiring process.  

This issue has been intensified by the convenience of applying for jobs using technology and the ongoing skills shortages across the UK. Some have taken to calling it the ‘Apply anyway’ movement. 

Power to applicants 

The current labour market conditions have shifted the power balance in favour of applicants. They can now explore multiple job opportunities and use competing offers to their advantage, which in turn slows down the hiring process even more.  

To address this, hiring teams are actively searching for ways to improve their "time to hire" metric, with over half of the respondents stating that their hiring process has too many steps. 

Recruitment agencies

Recruitment agencies are also struggling with the uncertainty surrounding the economy. Page Group, for instance, reported a 9.4% decrease in UK gross profits for the first quarter of 2023. These challenging conditions have led to lower confidence levels among both candidates and clients, causing delays in decision-making and a hesitancy for candidates to accept job offers. 

Employment fraud 

Since the financial crash of 2008, employment fraud has risen significantly. Leading auditing firm, RSM UK, recently revealed that employee fraud has risen 10% since last year.  

According to insurer, Zurich, theft at work in England and Wales has risen 19% over the past year. With the rising cost of living, many believe this trend will continue. Rose Sutton, a senior Zurich claims expert, said:  

“As cost of living pressures mount, employee theft has significantly increased, suggesting some workers could be turning to desperate measures to make ends meet.  

“The consequences of employee theft can be devastating for companies, resulting in reduced profits, lower staff morale and in extreme cases, even bankruptcy.   Consumers also lose out through higher prices. 

"No business is immune to theft in the workplace, which can go undetected for years, and occur at all levels.  Unless firms have the right protection in place, they have little chance of recovering stolen cash and goods, and may face other expenses, such as regulatory fines.   

For business owners, it's crucial to recognize the importance of background checks in combating employee fraud. These checks help you build a solid foundation of trust and security within your workforce.  
 
By screening potential employees for any discrepancies or suspicious activities, you can detect potential threats early on, reducing the likelihood of fraudulent behaviour occurring within your company.  
 
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