UK firms struggle to find staff as unemployment falls to lows not seen since the mid-1970s

This article is more than 1 year old

This article is more than 1 year old

Record numbers of unfilled job vacancies across Britain appear to have strengthened the bargaining power of workers to demand higher wages, amid mounting fears over skills shortages at UK companies.

According to the Office for National Statistics, the number of vacancies in the British jobs market rose by 16,000 to an estimated 870,000 in the three months to January, the highest level since comparable records began in 2001.

While the ONS said pressures were being felt across all sectors, with an estimated 2.9 job vacancies per 100 employee jobs, it said services companies were suffering the greatest shortfalls. Hotels and food services firms, IT and communications businesses and health and social care providers were among the most severely affected.

Economists said the shortfalls were among factors helping total average weekly wages rise by 3.4% in the year to December 2018. Regular earnings growth, excluding bonuses, also rose by 3.4%.

Deal or no deal, UK jobs will remain hard to fill | Larry Elliott Read more

Samuel Tombs, the chief UK economist at the consultancy Pantheon Macroeconomics, said: “With surplus labour extremely scarce and job vacancies rising to a new record high, workers are having more success in obtaining above-inflation pay increases.”

Companies across the country are facing increasing difficulty hiring workers amid the lowest levels of unemployment since the mid-1970s, while the numbers of EU workers in Britain has declined since the Brexit vote.

While firms have responded by raising wages above inflation, employers’ groups have warned that tougher post-Brexit immigration rules could limit their access to workers – acting as a drag on the economy and driving up consumer prices.

Fears among employers that Britain will suffer from a lack of migrant workers in the future were not borne out by the latest data. There was a fall of 76,000 in the year to December among workers born in the EU but this was more than compensated for by a 159,000 rise in the number of non-EU-born workers.

The number of UK-born people in work rose by 352,000 to 27 million over the year as Britain’s overall employment rate reached a record high of 75.8%.

Jon Boys, the labour market economist for the Chartered Institute of Personnel and Development, said: “With fewer EU nationals working in the UK as the same time last year, it’s vital that the government recognises the need for a flexible post-Brexit migration system to avoid worsening skill and labour shortages.”

Despite the acceleration in vacancies, pay growth still remains far below the previous peak of 6.6% recorded in February 2007 before the financial crisis. Vacancies at that time were close to their pre-crash peak of about 650,000 unfilled jobs.

Economists believe higher levels of precarious employment since the crash, as well as a reduction in trades union bargaining power, could be among reasons for weak wages growth after a “lost decade” for workers’ pay rises. Average weekly total pay is also still about £31 below the pre-downturn peak after inflation.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

The ONS said that as many as 844,000 people were employed on zero-hours contracts in their main job, down by 57,000 from a year earlier, although this figure is still above the pre-crisis level.

Frances O’Grady, the TUC general secretary, said: “Employers are still not giving people the pay rises they deserve, leaving them worse-off than a decade ago. Millions don’t have the security of a solid job, because the government won’t crack down on insecure work. And the prime minister’s reckless Brexit strategy is causing employers to take flight.”

Alok Sharma, the employment minister, said: “While the global economy is facing many challenges, particularly in sectors like manufacturing, these figures show the underlying resilience of our jobs market – once again delivering record employment levels.”