Brexit is exacerbating labor shortages as companies struggle to hire

Brexit has worsened Britain’s labor shortages over the past year, with industries most dependent on freedom of movement hit hard, according to a report led by Oxford University academics.

The research found that in parts of the economy such as hospitality and business support services there had been large declines in the number of EU workers, a significant increase in vacancies and few opportunities for employers to recruit from countries outside the EU.

The academics found no evidence that employers had responded by raising wages to attract UK-born workers to fill roles previously filled by people born in the bloc.

In a detailed study, the authors were careful not to put all the blame for labor shortages on Brexit, especially as there have been recruitment difficulties in sectors that travel in many countries that have recovered from the pandemic.

Early retirement of workers over 50 has also caused significant problems across the UK labor market unrelated to Brexit.

But labor shortages and vacancies were highest in sectors that were most dependent on EU workers before the pandemic, the report found. Employers in these businesses were unable to use new visa routes to find foreign workers, mostly because wage rates were low.

Sectors included hospitality and support roles such as warehouse staff and security.

In sectors including health and agriculture, where employers had access to non-EU workers due to special visa arrangements, there had been a major shift from EU to non-EU migration, the report said.

The data examined only covered the period up to June 2021, but EU citizens in employment fell by 6 per cent compared to the same month two years earlier, while working migrants from outside the EU had increased by 9 per cent.

Madeleine Sumption, director of Oxford University’s Migration Observatory and lead author of the report, said the figures show that “the end of free movement has made it harder for employers in low-wage industries to recruit staff”.

But she cautioned that the answer to this challenge was not necessarily to increase the number of visas available to lower-skilled foreign-born workers.

“Low-wage work visa schemes are notoriously difficult to police and often open workers up to exploitation and abuse. It’s also surprisingly difficult to measure shortages and figure out how to target immigration policy toward them, Sumption said.

Free movement did not suffer from these difficulties because workers were not tied to employers and had most of the same rights as British citizens, but a perceived lack of control over migration was a major factor in the vote to leave the EU in 2016.

One of the report’s most striking findings was that, contrary to the predictions of Brexit supporters, employers had not responded to shortages by raising wages.

“Early figures have shown no evidence of tight labor markets. . . has increased wage growth in low-wage jobs,” it said, noting that employers had largely cut production instead.

The report concluded that the government may want to “wait it out” in the hope that labor shortages will disappear over time as businesses and the economy adjust. It would avoid difficulties with new low-skill visa schemes, but would come at the cost of “disruption to some businesses in the short to medium term”.

The Home Office said it had reduced the time it took for employers to recruit overseas for those eligible for visas.

“However, employers should look to the domestic labor market rather than relying on overseas labor by making investment in the UK through training, pay rises and career opportunities,” it added.

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