Battered by the financial crisis and the pandemic, Britain has lost its culture of risk-taking. In the third of a special election series, The Telegraph examines how this has affected the economy and whether Labor can bring recklessness back to the city.
When Stuart Forrester and his wife founded their business and marketing consultancy in 2006, they turned to an unlikely place to recruit new recruits: the schoolyard.
The couple began hiring mothers they met during college as freelancers, while in 2019 the company used eight permanent contractors. However, as their business grew, they hit a recruiting wall.
The Forrester Corporation needed people to do more work, but their freelancers started cutting hours. “We were told, ‘I’ll be there at 4 p.m [a week]that’s where I want to stay,’” Forrester says.
Many of their freelancers had benefits, which they would lose if they worked more than sixteen hours a week and spent less time with their children.
Forrester had to find other ways to fulfill their customer contracts. Today he regularly uses a network of 13 contractors based mainly in the Philippines who charge 50 to 80 percent less than their British counterparts.
This is emblematic of a deep-rooted problem that is crippling British business and posing an existential threat to Labour’s promise to deliver the highest sustainable growth in the G7 if they win the July election: the British workforce has lost its dynamism.
Since the financial crisis, productivity growth has been the slowest since the mid-18th century. Britain has had the lowest business investment in the G7 for three years in a row. And economic inactivity has soared since the pandemic began, with nearly 1.1 million working-age adults leaving the labor market.
There are now 9.43 million people who are neither employed nor looking for work, a 13-year high.
Due to this exodus of personnel, companies are looking for employees. In spring 2022, the number of vacancies in Britain reached a record high of 1.3 million, an increase of 59% since before Covid.
This number has fallen steadily since then, but this spring there were still 904,000 unfilled jobs, more than at any time since the financial crisis – and a figure that roughly matches the post-pandemic rise in economic inactivity.
Exasperated employers are increasingly giving up on British workers. According to the National Institute for Economic and Social Research (Niesr), the number of companies registering to become sponsors for hiring foreign workers has doubled since 2021, to more than 76,000 last year.
“One of our members said they had 200 applications for one job, but only one was a British national. They approached the person and heard nothing back,” said Alexandra Hall-Chen, chief employment policy adviser at the Institute of Directors (IoD).
In the year to March, the number of work visas granted to main applicants reached 315,018, an increase of 130 percent compared to before the start of the pandemic in 2019. This was largely driven by a surge in the number of healthcare and healthcare workers.
The lack of skills has a negative impact on growth. “We absolutely hear from our members that skills and labor shortages are holding their businesses back,” Hall-Chen says. “It’s slowly getting worse.”
According to the British Chambers of Commerce (BCC) and the Open University, almost two-thirds of businesses are experiencing a skills shortage. “The brutal numbers tell the brutal truth,” says Baroness Lane-Fox, chair of the BCC and co-founder of Last Minute.
What might change under a Labor government? Sir Keir Starmer has outlined a New Deal for Working People, which will include the introduction of ‘day-one’ rights, and an end to the usual qualifying periods for entitlements such as sick leave and parental leave. Labor hopes this will encourage more people to work.
“We’re talking about jobs where there are plenty of people who can do those jobs, but they just don’t want to do those jobs. If you ask why not, it’s always about pay and working conditions,” says Alan Manning, professor at the London School of Economics (LSE) and former chairman of the government’s Migration Advisory Committee.
Companies are open to reforms, but there are concerns about higher costs and reduced flexibility in the labor market, Hall-Chen says.
“From our customers’ perspective, the big question is: what will my risk look like in the future? How should I manage that risk? And what will be my best way to bring in new talent?’” says Michael Stull, country manager at ManpowerGroup UK, one of Britain’s largest recruitment agencies.
Day-one rights will increase the cost of making a hiring mistake, he adds.
Insiders say there will likely be room for maneuver during the consultation process as Labor will work to avoid unintended consequences. “It is clear that the union-dominated era of Jeremy Corbyn’s leadership is largely over,” says one former employee.
What is clear is that without major interventions, the skills shortage will only worsen.
The number of 16 to 24-year-olds not in employment, education or training (Neets) has risen by 137,000 since the pandemic began reaching 900,000 in the first three months of this year, according to the Office for National Statistics (ONS ). .
This was the highest figure in almost a decade and means that more than one in eight people in this age group are neither participating in the workforce nor in the education system.
School absenteeism has increased since Covid, while performance has fallen. The proportion of pupils meeting expected standards when they leave primary school in England is declining, from 65% in 2019 to 60% in 2023.
The skills gap also has an insidious feedback loop. It takes a toll on the existing workforce. BCC research shows that 68% of companies have increased the workload of their employees.
A lack of skills in a team affects morale and well-being, says Lane-Fox.
“If you work in a team that is not well staffed, you may end up with more work on your shoulders, not being able to get things done, or not having the skills to do what you need to do. That must be a real confidence boost,” she says.
Much of the rise in economic inactivity is because Britain is getting sicker. The number of people who left the labor market due to long-term illness reached a new record of 2.83 million between February and April, an increase of 718,000 since the start of the pandemic.
Companies are reporting a rise in absenteeism among staff, which is likely linked to employee mental health issues, Hall-Chen says.
“It’s harder for young people these days, they’re just under more stress. The world they live in is riskier,” said LSE’s Manning.
The lockdowns had an impact on the workforce on multiple fronts. Covid made it harder for young people to gain work experience and develop soft skills. The shift to remote working meant that people with in-demand skills are now demanding more flexibility in work-life balance, Stull says.
It also means fewer people are physically moving for a job and the role of managers has changed, he adds. Some have adapted better than others.
Years of economic and political turbulence have led to stagnation. “In a world where there is more risk and uncertainty, people become reluctant to voluntarily change jobs and find better jobs,” says Manning.
At the same time, companies have cut back on investment in workforce training as they battle inflation in their supply chains and post-Brexit trade barriers, Lane-Fox says.
And attitudes towards work are changing. “Younger generations simply have higher expectations around work than ten years ago. There is more emphasis on having a purpose and there is more emphasis on balance,” says Stull.
A digital skills shortage is a particularly worrying barrier to business development because it makes it harder for companies to leverage new technology such as artificial intelligence, Lane-Fox says.
“It means that we are not modernizing our businesses and making them productive and growing in the direction in which the economy naturally tends. That really matters because it means they will no longer be competitive.”
British workers may already be uncompetitive. For Forrester, using foreign contractors only works for jobs with very specific assignments.
But the quality of the work is excellent and due to the time difference, the delivery time is often the next day, he says. “The work ethic seems fantastic.”
Broaden your horizons with award-winning British journalism. Try The Telegraph free for 3 months with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
