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Skills shortage costs British businesses £2bn a year, survey finds

Skills shortages in Britain are costing businesses more than £2bn a year in higher salaries, recruitment costs and temporary staffing bills, according to research by the Open University.

Its survey of 400 firms found 90% had faced difficulties recruiting workers with the required skills in the last 12 months. The findings will add to concerns that employers are already struggling to fill key jobs even before a potential clampdown on immigration once Britain leaves the EU.

Open University researchers noted that unemployment was low, those in work were reluctant to move jobs because of continued Brexit uncertainty and that a lack of clarity about future immigration rules was deterring some EU nationals from taking up roles in Britain.

As a result, the recruitment process was taking longer for three quarters of employers surveyed – an average of one month and 24 days more than expected. They estimated the extra costs from recruitment fees and hiring temporary staff as “at least” £1.7bn. They put the cost of inflating salaries to above the market rate in order to fill roles at £527m.

Steve Hill, external engagement director at the Open University, said employers should respond to skills shortages by helping train their workforces.

“The UK challenge of finding talent with the right skills means that businesses need to look at recruitment, development and retention differently,” he said.

The survey, conducted in April and May, found 56% of businesses had to increase the salary on offer for a role “well above” market rate to get the skills they required in the previous 12 months. The average increase was £4,150 per hire for small and medium-sized firms and £5,575 per hire for larger organisations.

While the firms surveyed highlighted higher starting salaries for new hires, official figures have shown average wage growth in Britain has slowed and fallen behind inflation, meaning many workers are worse off in real terms.

The Open University poll found about half of employers, or 53%, were unable to find a candidate with the required skills and chose to hire at a lower level as a result. More than half, again 53%, said they were using training to bring those new employees’ skills up to the required level.

The survey follows a report by consultants Deloitte last week that highlighted the potential pressure on employers if EU migrants choose to leave. Its polling of people outside Britain found the country was still a very attractive place to come to live and work, ranking above other nations. But its survey of people already in Britain found that 47% of highly skilled workers from the EU were considering leaving in the next five years.