UK economy: Airport staff shortages may spread as post-lockdown ‘high inactivity rate’ hits

The staff shortage chaos at Britain’s airports could spread to other areas of the economy amid continuing chronic labour issues caused by hundreds of thousands of people leaving the UK workforce during lockdowns, recruitment experts warned today.

Vacancies are at all-time highs with hospitality, travel and farming all badly hit – and employers’ attempts to attract workers with offers of higher wages threaten to push inflation up even further than its current level of 6.2 per cent.

The head of Manchester Airport quit after chaotic scenes over the past few months saw passengers queueing for up to four hours to make it through security – with unions claiming that this summer will be even worse.

John O’Neill, North West Regional Industrial Officer for the trade union Unite, warned: ‘Summer is going to be far worse than this. It is the time to get everything in place otherwise summer is going to very difficult.’

Warning about the potential impact to the rest of the economy, Recruitment and Employment Confederation chief executive Neil Carberry told MailOnline today: ‘Labour shortages are hitting sectors all over the British economy. 

‘Just this week we’ve had reports in industries varying from aviation to education to farming. These shortages have got worse over the course of the pandemic – we now have around 600,000 fewer people in the labour market than before Covid-19, and our own research shows the number of workers available to start new jobs is still falling month-on-month.’ 

And economists today claimed that it could take another two years for the recruitment crisis to ease and the country’s labour force to return to its pre-pandemic size. The phenomenon dubbed ‘The Great Lie-Down’ has seen 400,000 workers permanently leave the workforce, according to the Office for Budget Responsibility (OBR).

Some 210,000 of those can be accounted for by a ‘higher inactivity rate’ among those of working age, which is ‘largely the result of more early retirements and a greater prevalence of long-term sickness’ after the pandemic.

And the other 190,000 of the figure is due to foreign-born workers leaving the UK during the Covid pandemic and Brexit making it harder for new European Union immigrant workers to enter the country, according to the OBR.

Meanwhile experts at research consultancy Capital Economics have also found that the rise in inactivity has been ‘primarily concentrated among those over 50 years old, with the spread between men and women fairly even’.

Separately, the REC said vacancies have increased the most in North East England with job adverts in March up 81 per cent on January, while in London they rose 75 per cent.

Overall employment is still down 450,000 on pre-pandemic levels and there were 1.83million active UK job adverts last month – with particular high demand at the moment for hairdressers, security workers and bar staff.

But the REC warned that companies across Britain were ‘having to work harder than ever to hire the staff they need’ as they try to make adverts more attractive and offer more flexibility and benefits.

And an increase in wages could cause inflation to rise even faster – with the Consumer Prices Index already up by 6.2 per cent in the 12 months to February 2022, the latest figure which was a rise from 5.5 per cent in January.

Britons are already facing a cost of living crisis with National Insurance increasing by 1.25 percentage points, and the energy price cap up 54 per cent to an average of £1,971 a year from April 1 amid rising prices of various goods.

And Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: ‘We’ve already seen specific instances of squeezed professions offering big pay rises to attract staff, with logistics being one of the most high profile examples.

‘Overall pay figures show that wages have fallen behind inflation – and regular pay is down 1 per cent in real terms, but there are huge differences between sectors.

‘The overall figure is dragged down by the public sector, where wages are up just 2.4 per cent in the year to January. Compare this to wholesaling, retailing, hotels and restaurants, up 5.9 per cent in the year to January. CPI at the time was 5.5 per cent.’

She added that ‘retailers have been lining up to announce pay rises ahead of the minimum wage, to help them stand out and attract staff’, and cited B&Q, Screwfix, John Lewis and Currys as examples.

Capital Economics economist Bethany Beckett has predicted that most of the drop in the size of the labour force since the pandemic begin will eventually reverse, but she ‘wouldn’t be surprised if this took another two years or so amid slow recoveries in both the domestic labour supply and in inward flows of migration’.

The OBR, which is the Government’s budget watchdog, forecasts that inflation will peak at a 40-year high of 8.7 per cent towards the end of this year, due to surging energy costs and broader price rises. 

MPs warned today that low employee numbers in the food and farming sector could see food prices continue to rise, while economists say the inability of UK businesses to fill job vacancies could push inflation even higher. 

Capital Economics said there were three main reasons for the increase in inactivity – one that workers were waiting out lockdowns due to uncertainty; the second being a rise in those calling themselves students and not looking for work; and the third being a rise in retirements and those unable to work due to ill health. 

It comes as flights continued to be cancelled in the UK today with huge queues again forming at Birmingham, Manchester and Stansted airports. The bedlam is being blamed mostly on ‘staffing shortages and recruitment challenges’, and a sudden surge in passenger numbers – caused both by Covid and curbs being eased.  

The REC said there were 172,000 new job postings in the final week of March – but this was lower than the week before and the lowest since mid-January, with the labour market therefore showing signs of stabilising. 

The REC reported a significant increase in job adverts for hairdressers and barbers (up 9.4 per cent), security workers (up 9 per cent), and bar staff (up 8.4 per cent) in March 21 to 27, compared to March 14 to 20.

Other hospitality, leisure and service sector roles such as waiters and waitresses (up 6.6 per cent) also saw big rises, as well as specialist skilled occupations such as vets (up 8.3 per cent) and photographers (up 7.2 per cent). 

The devolved nations are also desperate to fill jobs, with five of the top ten hiring hotspots in Scotland and three in Northern Ireland, according to the REC. But the area with the highest weekly rise in job adverts was in fact Westminster (up 18 per cent), then West Dunbartonshire (up 13 per cent) and Highland (up 11 per cent).  

Mr Carberry said: ‘Businesses are having to work harder than ever to hire the staff they need, but it is possible to hire if you get your offer right. Consulting with recruitment experts about your approach, including broadening your search, making job ads more attractive and offering enhanced flexibility and benefits can all help, without breaking the bank.’

He also told MailOnline that there were ‘many reasons’ for low labour supply – including ‘workers retiring or stopping work to care for someone, some staying in college and some EU workers leaving the UK’.

But he continued: ‘These are long-term trends that existed long before the pandemic, and they will need long-term solutions. Collaboration between recruiters and government will be essential to make sure Job Centres can support people into work with the right training, links and advice.’ 

He said that the jobs market had been ‘super-heated’ in the first few months of the year, but the ‘first signs’ of stabilisation may now be emerging. Mr Carberry added: ‘Over the next few weeks, we will see whether this is the cooling we expected, or a slower market developing as employers factor rising inflation into their plans.’ 

Capital Economics expert Ms Beckett said economists fear that a small portion of the rise in economic inactivity ‘may prove permanent’, adding: ‘Most of the rise has been concentrated among the population aged over 50 years old, with around half of the newly inactive population saying they cannot work because they are long-term sick.’

She told MailOnline: ‘These groups may be unwilling to return to work or may face greater obstacles to do so. 

‘That suggests to us that the labour market will be tighter for longer than expected by most other analysts, including the Bank of England, and explains our view that faster wage growth will exert growing upward pressure on inflation in the coming months. 

‘As it stands, we have pencilled in nominal wage growth of over 5 per cent in 2022, though we suspect the risks to this forecast are skewed to the upside. Nonetheless, with inflation set to average over 7 per cent in 2022 as a whole, that still won’t be enough to avert a protracted period of negative real wage growth.’

Ms Beckett also pointed to ‘tentative evidence’ that sectors facing the greatest shortages of workers such as hospitality are now experiencing the fastest wage growth.

UKHospitality chief executive Kate Nicholls said the hospitality industry was also facing ‘chronic labour shortages – 400,000 vacancies in the sector at the last count’ and that this is ‘already harming the attempts of businesses in the sector to rebuild cash reserves and shattered balance sheets’.

She continued: ‘A failure to tackle the issue now will stifle the sector’s ability to drive the wider economic recovery and we share the committee’s warning that fundamental change is needed to if wage rises are not to trigger significant price increases in the sector, further damaging hopes of recovery.

‘We want to work hand-in-hand with the Government to examine, review and reset all the policies that we had pre-Covid in order to ensure that the immigration, training and skills policies we have now are fit for purpose in a post-pandemic market.’

There are also problems with filling jobs in the travel industry, with the World Travel and Tourism Council estimating at the end of 2021 that there would be an average shortfall of 15,000 workers in the industry this year with the labour market ‘expected to remain tight’. 

And tourism body VisitEngland said it had finished its English Tourism Week campaign just last month during which it had been ‘shining the spotlight’ on the ‘huge range and variety of jobs across the industry’ to encourage more people to consider a career in tourism. 

VisitEngland director Andrew Stokes added: ‘From tour operating, destination marketing, hospitality and hotel management to business events, visitor attractions and policy development, our people-focused sector has a huge amount to offer employees.’ 

Meanwhile Ms Coles from Hargreaves Lansdown said: ‘Higher wages will come as a huge relief to people in the short term. They’re facing horrifying price rises on all sides, and a pay rise offers the hope of making ends meet.

‘The problem comes over the long term if rises are high enough to feed into an inflationary spiral. Clearly this is a risk, but right now it could go either way. Employers are also under enormous price pressures, and will be keen to keep a lid on pay where they can.’ 

The latest official Government data from the Office for National Statistics released on March 15 reported a quarterly increase in the employment rate and a drop in the unemployment rate – but also found that economic inactivity had increased slightly on the quarter. 

Statisticians reported that that the UK employment rate increased by 0.1 percentage points on the quarter to 75.6 per cent, which was driven by full-time employees.

The ONS added that while the number of part-time employees decreased greatly during the pandemic, it has been rising since April to June 2021. However, it said that the number of self-employed workers remains low.

It also reported that the unemployment rate decreased by 0.2 percentage points on the quarter to 3.9 per cent, while the economic inactivity rate increased by 0.1 percentage points to 21.3 per cent.

Increases in economic inactivity compared with the previous three-month period were largely driven by those aged 16 to 24 years old, the statisticians reported. 

However, they said the number of economically inactive people aged 16 to 24 has been decreasing since early 2021, with those aged 50 to 64 years driving the recent increases in economic inactivity.

The ONS said professional occupations saw the largest difference for those aged 50 to 70 years, with 30,000 more people moving to ‘economic inactivity’ between the second and third quarters of in 2021 than in 2019.

The sectors of caring, leisure and other service occupations saw the largest proportional difference of 2.9 percentage points to 6 per cent moving to inactivity in the same period.

Meanwhile growth in average total pay – including bonuses – was 4.8 per cent and growth in regular pay – excluding bonuses – was 3.8 per cent among employees in November 2021 to January 2022. 

However, in real terms – adjusted for inflation – growth in total pay was 0.1 per cent and regular pay fell on the year at -1 per cent.

James Reed, chairman of the Reed employment group, told The Mail On Sunday last month that the impact of the pandemic on workforce size has been felt in many other economies and that the phrase ‘The Great Lie-Down’ had been used in China to describe the phenomenon.

He added: ‘During the pandemic, a lot of people decided they just wanted to change their lifestyle. A lot of those were over 50. That might have been a combination of health concerns or reprioritising lifestyle choices, such as family over work.’

Source: Daily Mail