Brexit and the UK Talent Shortage

Originally published in Governance and Compliance magazine, www.govcompmag.com

The UK has a skills gap. Maybe you’ve read about it, or maybe you’ve experienced it yourself. In the past year, a majority of organizations report having difficulties finding the right candidate.

Perhaps you’re in the fortunate position of being a well-qualified, capable and rounded individual and you’ve got recruiters calling weekly to try to convince you to jump ship. As a hiring manager, however, chances are you’ve got an empty position that you just can’t seem to fill and every candidate you interview either doesn’t seem quite the right fit or seems be missing some critical life skills.

The gap varies depending on location and sector, but the data are pretty clear. Research shows that the skills gap in the UK has widened over the past ten years.

A recent report from Barclays Lifeskills, based on a survey of 10,000 people, 500 educators and 600 organisations, showed over half of employment aged individuals in the UK “failing to demonstrate all the employability skills needed to succeed in the future workplace.” The survey focused on seven skills better suited to humans than to robots or AI – things like critical reasoning, problem solving or communicating via audio. As these skills are difficult to automate or hand off entirely to machines, they are likely to become more crucial to the economic success of the country in the coming decades.  

This talent shortage is more than simply a boon to qualified candidates or a pebble in the hiring manager’s shoe. Last year in their Business Barometer report, The Open University published that in 2018 alone this gap cost businesses a whopping £6.3 billion. The bulk of this additional cost comes from recruiting- either through longer recruitment processes (£1.23B) or higher salaries (£2.16B) paid to qualified candidates. The remainder is split between additional training of new, unqualified employees (£1.45B) and temporary staffing (£1.49B).

The spending on temp services absolutely fills a need – businesses have services or labor which needs to be performed in order to keep operating and generating revenue. But the downside to this significant spending can be heavy.

When David Willett, Corporate Director at The Open University writes: “buying skills and not building them is a short-term approach, which ultimately won’t pay dividends,” he highlights the fact that this method does nothing to improve the skills gap. Organizations pursuing this approach neglect to develop their own talent.

Uncertainty surrounding an impending chaotic Brexit makes the matter worse. Future visa arrangements as well as the ‘rights to remain’ for EU citizens already living in the UK are still under discussion at the time of this writing. Managers worry about their future ability to draw from the international talent pool to try to compensate for the gaps in the home labor market. With the unclear situation looming over candidates and employers alike, it is expected this skills shortage will only worsen in the coming months and years.

According to a report by the Adecco Group a global staffing firm: “… 71% of UK managers think that Brexit will make skills harder to acquire for organisations operating in Britain.”

Why does this matter?

Besides the obvious additional cost to businesses and the risk of the UK falling behind on the ultra-competitive global playing field, why is this important?

The lack of suitable talent and capable managers with basic life skills will drive a need for more robust health and safety regulations.

Health and safety is not just the responsibility of the business owner, or the HSE (Health, Safety & Environment) Coordinator (assuming the company is large enough to have such a position). Health and safety is everyone’s responsibility and everyone in the organization is dependent upon each other to follow the rules in order to maintain a safe and secure working environment. One weak link, one person under pressure – or perceiving themselves to be under pressure – to skirt the rules can cause irreversible damage to a business’ reputation, customers, other employees, or the environment.

As an example, in 2016 the largest fine (£5M) issued through an HSE prosecution case went to Alton Towers operator Merlin Attractions. Arinite.co.uk reports that the accident in which two teenagers each lost a leg: “was the result of an engineer who said they “felt pressure” to get the Smiler back into service after it developed a fault shortly before the crash.”

Perhaps he wasn’t trained properly, or perhaps there were other factors in play. In either case, this was a clear situation where an employee or the employee’s managers either didn’t understand or didn’t take seriously the rules and procedures in place to meet HSE regulations.

How are regulations changing?

Since 2017 when the three year initiative “Helping Great Britain Work Well” began, the focus of HSE regulation has started to shift towards HSE being everyone’s responsibility rather than the responsibility falling entirely on one “HSE coordinator” within a business. PHSBeSafe.co writes about the initiative:

“It also places a focus on prevention rather than cure by helping organisations to understand the importance of sensible and proportionate risk management. The aim is to reduce costs and lower sickness absences.”

Other changes in 2018 included:

  • Updating the Ionising Radiation regulations
  • Implementation of Personal Protective Equipment (PPE) regulations

Additionally, some of the topics that HSE regulations will focus on in 2019 include:

  • Reduction of Occupational Lung Disease, Musculoskeletal Disorders and work related stress
  • Managing exit from EU to ensure stability and certainty for employers and employees
  • “Prepare any necessary changes to the chemicals regime”
  • “Deliver a programme of targeted interventions concentrating on controlling high-consequence risks from legionella, fairgrounds and major construction projects”

Cost of Compliance

For many organizations, complying with HSE regulations is not cheap. According to Arinite, a professional Health and Safety consultancy in the UK:

“medium to large size companies can expect to pay between £5-£20k per year for health and safety and for small companies it is often less.”

The costs of staying compliant and maintaining a safe working environment begin with performing a risk assessment. Based on the level of assessed risk, the company determines the best method to stay compliant.

In a low risk field, beyond fire extinguishers it may suffice to simply implement rules and procedures. Annual costs could come from requiring a certain number of employees first aid certified or implementing a basic health and safety at work training.

In a more risky environment – such as mining or construction – the costs of compliance are likely to be higher and more industry specific. In addition to basic first aid, employees may need certain protective equipment or specialized training to deal with hazardous chemicals or dangerous situations.

As the regulations change in response to a less qualified public, the effort required to stay up to date on current regulations will also increase. Smaller companies without dedicated HR functions will find it exceedingly difficult to keep tabs on who needs which trainings and at which intervals. They may determine it better to outsource not only the training itself to a company like Findcourses.co.uk, but also the function of managing the details of keeping up with a changing regulatory environment.

Cost of Non-compliance

As costly and complicated as compliance can seem, especially in challenging times, non-compliance can be far more expensive. In a report by Pro-Sapien (an EHS software supplier) the average fine for a convicted violation is nearly £150k per instance. Of course, this figure is only the fine and doesn’t consider costs for production downtimes, missed work or payouts for injuries or loss of life (which are often not insured).

Additionally, on top of these monetary costs for violations and accidents – the resulting damage to a company’s reputation can be devastating. Ignoring the rules and regulations can endanger health and livelihood of employees and customers as well as risking great harm to the environment.

Conclusion

While Health and Safety compliance is a complex and sometimes costly topic – it’s simply too risky for a company to be ignorant of changing laws and regulations. The stakes are too high. Businesses will need to be proactive and adaptive to keep up with the changes in order to remain compliant.