High vacancy rates and skills shortages continue to hold back capital’s firms

High vacancy rates and skills shortages continue to hold back capital’s firms – BusinessLDN, FSB London, LCCI & CBI London survey

Ahead of next month’s Budget, the capital’s leading business groups today, Monday, joined forces to highlight the extent of skills shortages facing London’s firms, with a major new survey showing the majority are carrying open vacancies and struggling to fill them.

The weighted survey of more than 1,000 London business leaders and HR managers, carried out by Survation, finds that three-quarters of firms (77%) are reporting open vacancies and of those two-thirds (65%) are struggling to fill them. Vacancies span all types of roles, with specialist, skilled and managerial jobs the toughest to recruit. Skills most in demand are sector-specific technical skills, transferable skills, such as negotiation, and basic digital skills, with the latter expected to be most prized in the future.

The survey was carried on behalf of the four business groups developing Greater London’s Local Skills Improvement Plan (LSIP), which seeks to ensure training better matches the needs of businesses. The LSIP project is being led by BusinessLDN, in partnership with Federation of Small Businesses London (FSB London), London Chamber of Commerce and Industry (LCCI), and Confederation of British Industry London (CBI London).

The survey also reveals how firms are stepping up efforts to ensure their workforce reflects the diversity of the communities in which they operate, for example, using specialist recruiters, diverse shortlists and blind CVs.

John Dickie, Chief Executive at BusinessLDN, said:

“With most businesses running vacancies they can’t fill, it’s vital we unlock the full potential of the capital’s workforce by giving Londoners the skills employers need – whether they are already in work or not.

“Firms are struggling to recruit across all types of roles, from entry-level posts right through to technical experts, with sector-specific and digital skills most in demand.

“With the majority of companies looking to increase investment in training, the Government can help ease the current crunch by making existing programmes easier to navigate, providing more online and short modular courses and ensuring current spending is targeted on developing the competencies they need now and, in the future, especially in digital and green skills.”

Respondents to the survey highlighted a range of solutions to boost skills – from greater availability of online and modular training, more courses developed between industry and providers, making government programmes easier to understand and tax incentives to offset the cost of training.

Looking at the survey findings in more detail:

Current recruitment challenges

• Firms are finding it hard to recruit at all skills levels: almost half report challenges finding highly skilled specialists (49%), followed by technical and skilled support roles (43%), managers (35%), skilled trades (30%) and sales and customer service roles (26%).  A quarter (24%) struggling to fill entry-level positions.
• The biggest challenge to recruitment is a low number of suitable applicants with the required skills, cited as a problem by 57% of firms, followed by competition from other firms (40%), lack of flexibility on offer (37%), the job entailing anti-social hours (31%) and a general lack of interest in the role (31%).
• Of those who had a lack of suitable applicants, almost two-thirds pointed to candidates’ lack of “soft skills” such attitude, motivation, or personality (64%), while a similar percentage cited their lack of experience for the role (62%) and almost half lacked the right qualifications (47%).
• While two-thirds of firms (66%) say their existing workforce has the right skills and capabilities to meet their business’s needs, the remainder report gaps. Of the latter, respondents report gaps in the following skills: technical (58%), cross-cutting skills, such as negotiating (42%), basic digital (42%), basic maths (23%), English (21%) and green (21%).
• When asked to what extent their workforce reflects the diversity of the communities in which their business operates, half of the companies felt their workforce did, 38% say it partially reflects their community, 7% said it didn’t and 5% didn’t know.
• Among the measures being deployed to improve diversity, firms are opting for specialist recruiters (40%), community outreach (34%), diverse shortlists (34%) mentoring, diverse talent identification (30%) and blind CVs (23%).

Future skills need

• In the next two to five years, digital skills are expected to be most in demand, with more than half of respondents (56%) reporting a need for advanced and a third for basic digital skills (33%). Sector-specific technical skills (49%), cross-cutting transferable skills, such as negotiation and resilience (31%), basic maths (29%) English (23%) and green skills (23%) will also be in demand.
• Encouragingly firms are looking to invest in their workforce with 69% planning a net increase in training, a quarter planning to maintain current levels of investment and just 5% planning a net decrease.

Barriers and incentives to investing in training

• In terms of barriers to investing in training, among the issues firms highlight in the survey are cost (47%), time available (42%), relevance or quality of training (40%) and knowing where to find the right training (34%).
• Several ways to boost training are suggested by respondents, including greater availability of online provision (47%), more courses co-created with employers (38%), more shorter modular courses (38%), government provision being easier to understand (37%), tutors with up-to-date knowledge of industry (36%), tax breaks to offset the cost of training (34%), help with finding training providers (33%) and more responsive training providers (31%).

Anneka Hendrick, CBI London Regional Director, said:

“In order to help drive growth and productivity across London, it is vital that our skills system meets the needs of employers. We’re delighted to be working alongside the capital’s other Employer Representative Bodies to help tackle the acute skills shortages highlighted by this Survation poll. And we welcome the steps already taken by firms to improve workplace inclusivity and workforce diversity. We aim to create a blueprint for transforming the skills system to meet local needs – and an environment that boosts firm’s investment in capital.”

Rowena Howie, FSB London Policy Chair, said:

 “The results in this co-ordinated business survey highlight the need for action to help firms of all size navigate the skills landscape. Separate FSB data shows that the ability for employers to get the skills they need has become the second highest barrier to business growth in the last quarter of 2022.

“A focus on digitally focussed learning – being created in a bite sized and nimble fashion – will enable many small firms in the capital to become more competitive.”

Richard Burge, Chief Executive Officer at the London Chamber of Commerce and Industry (LCCI) said:  

“It is crucial for Britain to invest in hiring employees with the right skills and talent, as they boost productivity and drive economic growth of our country. As reiterated by London businesses in LCCI’s quarterly Skills Survey, skills shortages not only stunt business growth and affect employment but also have long-term implications for the future of our young professionals. In an environment where demand is outpacing supply, skilled workers are the backbone of our fragile economy.

“The Local Skills Improvement Plan (LSIP) acts as an anchor for the government to review and reform its strategy on filling acute skills gaps. London businesses are already operating in a turbulent business environment. This is affected by the cost-of-living crisis, soaring energy costs, and rising inflation, which puts additional pressure on their hiring capacity. We must address all issues that prevent London from maintaining its status as the preeminent global city.”