Skills Shortages in the Manufacturing Sector
More than a year has passed since the United Kingdom voted to leave the European Union. Since then Brexit has rarely been far from the top of the news agenda and has almost replaced the weather as the go to conversation starter.
One of the biggest talking points during the Brexit referendum campaign was immigration, and the rights of EU migrants is already proving to be one of the most important aspects of the Brexit negotiations. Restricting immigration was one of the main drivers behind the Leave vote and so it was always inevitable that one of the main casualties of the UK’s exit from the EU would be the free movement of workers principle. This was highlighted in the recent Queen’s Speech confirming that this principle would be replaced with a UK Immigration Bill.
This may not come as welcome news to employers in the manufacturing sector, who according to a report earlier in the year by EEF (“the manufacturers’ organisation”), are already struggling to recruit skilled workers. A recent report by the Local Government Association has also suggested that the UK skills shortage could cost the country around £90billion per year.
It is estimated that there are over 3 million EU nationals living and working in the UK and that certain industries and sectors rely on those EU migrants. With the skills shortage in the manufacturing sector, a restriction on EU immigration may only heighten this problem for employers in the sector. As a result, manufacturing companies in the UK may find it increasingly difficult to compete with overseas competitors.
As the demand for certain skills increases and the supply decreases, this may result in the cost of labour increasing, resulting in tighter margins and reduced profitability for manufacturers. For those companies in the manufacturing sector already struggling as a result of tough export markets, steel plant closures and uncertainty in the oil and gas industry, this may cause considerable difficulties.
Perhaps the Government’s recent Policy Paper, “Rights of EU Citizens in the UK,” which states that “the UK Government has made it absolutely clear how important it is that we secure as early as possible both the rights of EU citizens in the UK and UK nationals in EU member states” will ease concerns in the manufacturing sector. However, that very same Policy Paper is described as “an offer” and there is as yet no agreement and so no certainty for EU workers or employers.
Employers facing labour and skills shortages may have to turn to other options in the event of restricted immigration controls. One option might be increasing the use of automation – technology is increasingly being used to fill labour shortages across a variety of sectors. Employers should also consider investing in retraining and upskilling their current workforce. Apprenticeships also offer employers the opportunity to train new employees and can target that training at the skills most needed in the sector. Perhaps the new apprenticeship levy introduced in April this year will help with that. This is the obligation on all UK employers (whether they employ apprentices or not) with an annual pay bill in excess of £3m to pay an apprenticeship levy of 0.5% of their annual pay bill through the PAYE system. The idea is that the levy will be paid into an account through which employers can access funding for apprenticeships.
With restrictions to the free movement of workers almost a certain outcome of the Brexit negotiations, employers in the manufacturing sector should therefore be carrying out risk assessments to identify those workers reliant on free movement rights. If EU immigration decreases and skills shortages continue in the sector, maybe a combination of automation and apprentices will help towards finding the solution to this growing problem in the manufacturing sector.