UK faces severe workforce crisis by 2025

Impact of Brexit, falling net migration and ageing population set to cause a UK workforce crisis

New projections published in Mercer’s Workforce Monitor predict that a perfect storm of falling net migration driven by Brexit and an ageing population, will lead to a severe shortage in the UK labour market. If these challenges are not met with immediate action by UK employers, they will face significant costs trying to attract workers with the leadership and skills they need to execute their business strategies.

Mercer anticipates the UK workforce will increase by just 820,000, or 2.4 per cent, by 2025, a significant reduction in recent trends that have seen 9 per cent workforce growth in the 10 years to 2015. For the first time in half a century, the overall population will be increasing at a faster rate than the workforce, creating long term structural challenges for the economy.

In its report, Mercer models an additional demand for labour in the health and social care sector of 710,000 workers based on the needs of an anticipated further 2 million over 65s in the UK by 2025. Assuming this demand is met through the forecasted workforce growth, only 110,000 additional workers will be available to drive the growth of all other industries seeking to grow. In the ten years to 2015 there was a similar expansion in the number of people working in the health and social care sector; however, other sectors were able to grow with an additional 2 million workers available.

Mercer also expects there to be a significant shift in age demographics across the workforce. Projections suggest that over the next eight years there will be 300,000 fewer workers under the age of 30 and 1 million more over 50 in the UK as a result of falling net migration and ageing baby-boomers. This is likely to have a particular impact on London, whose economy is heavily dependent on young and migrant labour. Mercer forecasts that London’s resident under 30s worker population will fall by 25 per cent, whilst over 50s will increase by 25 per cent.

In its report Mercer holds factors that will impact future workforce supply, such as technology changes and gender participation, either constant or at trend to allow a more detailed focus on the underlying supply-side dynamics. This then emphasises and helps inform the talent strategy aspects that organisations can proactively control in order to address the impending recruitment and retention challenges. To help businesses Mercer has set out Five Lines of Defence:

  1. Buy, build and retain – develop a compelling employee value proposition to strengthen traditional sourcing methods, focus on retention
  2. Diversify the talent pool – bring deeper insight to new and different sourcing methods to attract inactive workers and new types of employees
  3. Improve productivity through automation – where there’s a business case for it, automation can help relieve workforce gaps
  4. Move and relocate work – consider moving roles to parts of the country where more workers can be found
  5. Regroup – consider whether the realities of the potentially shrinking workforce can support your growth ambitions

 

“There are going to be big winners and losers in the battle for workers. If businesses don’t take action now they will face significant costs and left in a poor position to take advantage of the productivity enhancements promised by rapid development of robotics, digital and machine learning,” said Gary Simmons, Partner at Mercer. “Companies basing their recruitment strategy on a steady stream of young school leavers and graduates are in for a shock. With the under 30s group set to shrink considerably companies need to look beyond their usual sources for new skills and talent.

Young workers don’t grow on trees. The answer lies in realising that diversity and inclusion practices and policies are needed not just because it’s the right thing to do. Creating a workplace inclusive of and attractive to all, regardless of age, gender, sexual orientation, disability and ethnic background is now a business necessity. Companies need to think both urgently and creatively about how to attract a more diverse group of people, including the over 50s and particularly parental leave returners in order to tap into that wider talent pool.”

Mercer’s Workforce Monitor is a regular publication that tracks and projects the changes in the UK’s workforce caused by migration and demographic change using data from numerous official sources. Mercer’s first edition highlighted how the UK’s ageing society combined with post-Brexit limits on migration is likely to cause a workforce crisis unless companies follow the five lines of defence: Retaining staff, diversifying their employee base, automating, relocating to new parts of the UK or, more drastically, reconsidering business operations in the UK.

If you’re interested in the future of work, take a look at the programme for our Future of Work summit held in London on 18th October


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