Labour market still a headache

The labour market remains tight and is dragging on economic growth, says the Chamber.

The latest figures from the ONS showed that the unemployment rate has crept to 3.8 per cent but that there are still more than one million job vacancies in the UK economy.

Corin Crane, chief executive of the Coventry and Warwickshire Chamber of Commerce, said: “There will be some concern that the unemployment rate has risen slightly but the biggest issue for the economy is having more than one million vacancies that are not being filled.

“I’ve never known a time like it where we have businesses saying that they have orders and they have demand but they cannot get the people to fill those posts. It is affecting economic growth regionally and nationally.

“The Chamber has been making the case on this matter for months and we are also working regionally on the Local Skills Improvement Plan for the West Midlands with fellow Chambers across the area.

“It is absolutely fundamental that we solve this in the long term but, equally, there is a short-term crisis that needs to be fixed.”

Jane Gratton, Head of People Policy at the British Chambers of Commerce, said: “The Government needs to fix the people problem in the economy if it is to have any hope of boosting growth.

“But despite the latest fall of 47,000 in overall vacancies, the total number is still well over 1m.

“These unfilled jobs are a drag anchor on firms, preventing them from fulfilling orders and taking on new work. People shortages are also, inevitably, feeding into upward pressure on wage demands, as seen by private sector pay growth of 6.9%. This remains a big concern for the Bank of England and a chief reason for the continuing rise in interest rates.

“The Government and employers need to work together to shift the dynamics on vacancies. While employers can do more to make workplaces more accessible and flexible, the Government must quickly put in place its Spring Budget childcare reforms.

“It also needs to make sure there is enough high-quality supply to meet demand, and that people are supported back into work.

“When firms cannot recruit and train from the local labour market, and where national shortages are crippling sectors of the economy, they must have access to skills and labour from outside the UK. We need a pragmatic approach to immigration policy - that ensures the Shortage Occupations List accurately reflects the reality on the ground.”

A representative from the Bank of England has told businesses in Coventry and Warwickshire that the unemployment rate is unlikely to increase in the second quarter of 2023.

Graeme Chaplin, the Bank of England’s Agent in the West Midlands, met members of the Coventry and Warwickshire Chamber of Commerce on a virtual roundtable to update firms on the economy and to hear how firms in the region are faring.

He heard from a range of companies on their prospects for growth, cost rises, and recruitment and retention of staff to help inform the decision making of the Bank’s Monetary Policy Committee.

Graeme said the UK economy has been subject to a sequence of very large and overlapping shocks but monetary policy will ensure that inflation will return to the two per cent CPI target sustainably in the medium term.

He said: “The UK is currently experiencing high CPI inflation, a tight labour market and subdued GDP growth.

“Global growth is expected to be stronger than we projected back in February and consumer price inflation in advanced economies has remained elevated. However, wholesale gas futures and oil prices have fallen materially.

“UK economic activity is likely to have been broadly flat around the turn of the year, but is now expected to increase slightly in the second quarter. CPI inflation is expected to fall significantly in the second quarter of 2023.

“Meetings such as this with the Chamber of Commerce are vital because they give the Bank a real, first-hand insight into how businesses on the ground are feeling.”

Sean Rose, head of policy at the Coventry and Warwickshire Chamber of Commerce, said: “It is always great to meet Graeme from the Bank of England as he offers members up to the minute intelligence on the economy and the latest information from the Bank.

“It’s also an ideal opportunity for businesses to explain the issues they are facing and talk about their own prospects for the months ahead.

“The details from the individual companies remains anonymous so they can talk openly and candidly to give Graeme the most accurate insight.”