Workforce challenges overtake interest rates and business costs - survey

Midlands businesses face a squeeze on their workforce in the next six months, as skills and labour shortages outstrip rising interest rates and business costs in the list of top concerns.

A third of mid-sized businesses in the region (33 per cent) have ranked workforce challenges, such as recruitment and retention costs, skills gaps and a shortage of workers, as one of the biggest issues facing their business - second only to helping employees through the ongoing cost of living crisis.

According to BDO LLP 's bi-monthly Rethinking the Economy survey of 500 mid-market businesses, more than half of Midlands businesses (55 per cent) say it 's too expensive to hire staff - pointing the finger at the cost of immigration bureaucracy, National Insurance contributions, and the expectation of higher pay and more benefits during the cost of living crisis.

The survey also found that 42 per cent of regional businesses have been unable to replace staff who retired during the COVID-19 pandemic, with data from the Office for National Statistics (ONS) showing a mass exodus of over-50s from the labour market between March 2020 and November 2021.

This follows record high employment rates of 50-64-year-olds in 2019. In the West Midlands alone, 75 per cent of people aged 50-64 were more likely to be economically inactive, slightly higher than the national average, for the year ending June 2021.

Currently, the biggest areas of concern for Midlands businesses is recruitment of entry level (25 per cent) and lower managerial levels (27 per cent). As a result, business leaders are taking significant steps to address workforce challenges over the next six months.

Kyla Bellingall, (pictured) regional managing partner at BDO LLP in the Midlands, commented: “Time and again over the last three years, we have seen regional businesses thinking outside the box when faced with growing pressures.

“Workforce challenges are no different, with businesses changing their recruitment practices and offering specific incentives targeted at attracting more diverse talent, as well as offering additional support for employees facing illness or long-term health conditions.

“The landscape has changed considerably, and a significant number of businesses have flexed to adapt to it. ”

The Rethinking the Economy survey also showed that over the next five years, Midlands businesses intend to invest in upskilling their existing workforce (37 per cent), with more than a quarter making a concerted effort to reverse the slide in the number of over 50s workers (27 per cent).

Similarly, 23 per cent of Midlands businesses intend to launch new products or services to support business growth in the face of labour shortages.

As workforce challenges add to mounting economic pressures, additionally businesses are turning to technology and automation in order to address operational and productivity shortfalls.

The survey found that over the next three years, nearly half of Midlands businesses (40 per cent) intend to invest in industry specific cloud platforms to accelerate their business initiatives, with 43 per cent investing in systems to improve cyber security resilience.

Bellingall added: “What is clear from our latest survey is the need for greater support from the Government, to help Midlands businesses address long-term challenges. Without more targeted intervention from Whitehall, mid-market businesses will continue to struggle in the face on ongoing adversity. ”