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Distributed Workforce Combats UK Labor Shortage

Distributed Workforce Combats UK Labor Shortage

While the UK economy has fully recovered to pre-COVID numbers, the workforce is still suffering. Despite the lowest unemployment rate since the 1970s, there is a high vacancy-to-unemployment ratio. OECD data shows the UK has the most significant percentage drop in the active workforce, behind only Italy, across the Group of Seven. In addition to the worker shortage, there is a considerable churn rate across industries.

If employers want to combat the significant labor shortage the UK is encountering, and eliminate the recruiting difficulties this creates, they may need to change their recruitment strategy.

Where Have the Workers Gone?

Surprisingly, the large spikes in unemployment expected at the end of the furlough scheme have not come to fruition. There is an entirely different issue that employers are facing: a significantly smaller number of workers. The Office for National Statistics (ONS) has found the UK workforce is smaller than pre-COVID numbers by about 400,000.

Research has identified a few reasons why the numbers are suffering so significantly. A combination of COVID-related illness, Brexit, and a rise in the “economically inactive” population has led to a significant decrease in available workers as well as higher churn rates.

Covid-Related Illness

Long-term sickness, often from COVID-related illnesses like long COVID, accounts for a large percentage of that loss. One study conducted by Reuters suggests that this accounts for about two-thirds of the workforce loss—with upwards of 200,000 workers leaving due to long-term sickness between Q4 2019 and Q1 2022.

Brexit-Forced Departure

Brexit, the removal of the UK from the European Union, has exacerbated the labor shortage as the UK can no longer easily employ Europeans from other countries because of the added hurdle of a work permitting process.

ONS estimates nearly 100,000 more EU nationals left the UK in 2020 than arrived. That number is up by 40% over 2019, thanks to a combination of Brexit and COVID lockdowns.

Covid-induced lockdowns may have lifted, but those workers are not returning to the UK due to more stringent immigration rules for EU nationals. Unfortunately, this has led to a mismatch between the jobs available and the number of people willing to fill the positions in that industry.

Rise in “Economically Inactive”

The UK is also seeing a significant increase in the number of “economically inactive” workers. “Economically inactive” means those who are not looking for work or are unavailable for work.

Older workers have chosen to permanently leave the workforce, with many taking early retirement, leaving large vacancies and accounting for a large percentage of the loss. The Reuters study found this accounted for a loss of 49,000 workers.

On the other end of the spectrum, the UK is seeing a significant rise in “economically inactive” younger people, accounting for 55,000 departures, according to Reuters. The younger generation is choosing to stay in school full-time longer, also contributing to the labor shortage.

The Call for a Borderless Workplace

While the largest percentage of labor shortages are in industries that may not be suited for distributed workforces—like hospitality, horticulture, and transportation—there are many that could benefit. While Brexit does limit the number of vacancies that could be filled by a global talent pool in-person, many positions could be filled remotely.

The UK labor shortage is expected to continue growing in size as more active workers become “economically inactive.” A borderless workplace that employs a distributed workforce is really the only solution to make up the numbers.

Why? A distributed workforce allows employers to fill vacancies with top talent by not limiting their recruitment to the UK. It opens companies up to a global talent pool and allows them to focus their attention on filling the position with the best candidate, not the closest.

Even with remote workers, there are additional complexities to consider when hiring across borders. Working with a global EOR/AOR can help you navigate many of the complex legal and compliance issues that arise when hiring over borders, while dramatically speeding up the time-to-hire process.

People2.0 Implemented a Borderless Workplace (You Can Too)

People2.0 has implemented a Flexible Work Program to empower a borderless workforce that focuses on the best talent, not the nearest talent. A borderless workplace not only opens up opportunities to fill vacancies, but it provides additional incentive to workers who value flexibility—which is becoming increasingly important as the “life-work shift” continues among leaders and workers.

The benefits of a flexible, distributed workforce continue to grow. People2.0 has employment capabilities in more than 30 countries making it easy to employ practically anyone for any job, anywhere. Hire a distributed workforce compliantly. Visit People2.0 today!

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