London’s businesses face a pressure cooker of rising wages and skills shortages next year

No matter what the latest ONS employment and GDP figures say when they're released this Wednesday, the conversations I'm having with employers reveal that confidence is now firmly rooted in the British economy.

 

In fact, there is a resoundingly positive attitude to growth next year, according to our latest report, Hays UK Salary and Recruiting Trends 2016.

 

While this is fantastic news for the UK, it's not time to break out the champagne just yet. Economic confidence shifts the pressures being felt by businesses, it doesn't get rid of them. Organisations need to address the challenges presented by an increasingly fluid jobs market, pressure to increase pay, and a continued skills shortage. For if they don't, they may wither rather than grow.

 

UK economic confidence, as you would expect, is nowhere more visible than in London, where 69 per cent of organisations are expecting an increase in business activity next year and 77 per cent are looking to recruit more staff.

 

 

As many employers are finding out, however, one of the by-products of increasing confidence in the economy is that it hands more power to employees. In fact, our research shows that three fifths of employees in London across all sectors are expecting to move jobs within the next 12 months, higher than the national equivalent.

 

With a third of those looking to move doing so because of their pay, it appears businesses will need to dig deeper into their pockets to retain their best talent and take on additional work next year. But it's not just about pay. In London, a lack of future opportunities was cited as the joint top reason, alongside pay, for employee movement. Businesses can't rely on remuneration alone, and will need to communicate better with employees about career progression and the opportunities open to them in order to compete for the best people.

 

The pressures of a more confident, fluid jobs market will only be compounded by the ongoing skills shortage facing the UK.

 

There's been a huge amount of noise around the problem over the past 12 months but, it appears, little action taken. Our findings show that over three quarters of employers in the UK are concerned they will face a shortage of suitable candidates when recruiting and a third don't have the talent they need to achieve their business objectives, both similar numbers to last year.

 

 

This is a real concern. We not only need to ensure that the UK is open to overseas talent but that there is increased investment in training and skills development too. Likewise, we need to ensure that our youngest talent, from all backgrounds, comes into the workforce fully prepared and armed with the latest skills, whether that's knowing their Python from their Java or having a solid base of learning in Stem subjects. It's one of the key themes at today's CBI conference, and for good reason.

 

It would be all too easy to forget the lessons we learnt during the economic pain of only a few years ago. But do so at your peril. Businesses need to continually adapt, listen and evolve to grow, and it will be those that can apply these lessons to an increasingly confident workforce that will thrive.

 

In an environment where skills and top talent are becoming increasingly hard to find, this will mean offering competitive remuneration packages, clearer paths for career progression, and a range of flexible working options. Those that don't risk getting left behind.