Tue 1st Aug 2017
Quarterly Economic Survey: Recruitment difficulties a major issue for local businesses
A staggering 81 per cent of manufacturers and 71 per cent of services businesses taking on staff say they had difficulty recruiting for positions in the second quarter of this year.
That is just one of the findings in the latest Northern Ireland Chamber of Commerce and Industry (NI Chamber) and BDO Quarterly Economic Survey (QES) published today (1 August 2017).
The report for Quarter 2 of 2017 reveals that recruitment difficulties particularly in professional and managerial staff and skilled trades for manufacturers placed a burden on other employees (44%) and lowered productivity for almost 1 in four businesses (23%). Almost the same percentage (24%) of businesses said they had difficulty in meeting customer needs and 18 per cent gave recruitment problems as the reason for restricting business growth.
Recruitment intentions were strong in Q2 with 69 per cent of manufacturing businesses who responded to the survey reporting they had tried to recruit new staff over the last 3 months. However, recruitment intentions in the service sector did weaken during Q2 with 54 per cent of businesses trying to recruit, down from 66 per cent in Q1.
Respondents cited a lack of the right skills and attitude as the main driver of recruitment difficulties among local businesses. They said there were not enough applicants to meet the required skills (32 per cent said this was a major issue) while 31 per cent said there were not enough applicants with the required attitude/motivation.
Some 22 per cent of businesses feel that there are not enough applications generally with 20 per cent noting a lack of work experience as a major issue and 18 per cent stating there is too much competition from other employers.
Overall, the results showed continued business growth in Northern Ireland despite mixed performances by both the manufacturing and services sector during Q2.
There was a positive performance by the manufacturing sector during Q2 as most key balances strengthened – despite considerable cost pressures. The sector’s domestic (UK) sales and orders balances continued to improve although growth did appear to slow. There was also a strong pick up in export sales and orders over the quarter. Businesses continue to face pressures largely from rising raw materials costs, but increasingly from pay settlements, putting manufacturers under pressure to raise prices. Investment intentions by the manufacturing sector, both in capital and skills, bounced back to levels last seen before the outcome of the EU referendum. There had been a deterioration in investment intentions following the referendum results.
There were signs of a slowdown in growth in the services sector during Q2 2017 as 11 of the 14 key services balances fell. Fewer businesses reported increased sales and orders in the domestic economy and the export order book weakened slightly. Pressure to raise prices in the service sector did ease during Q2 but businesses are increasingly under pressure to raise prices due to pay settlements. Investment intentions by the service sector in capital weakened during Q2 while remaining largely unchanged around skills development.
Business confidence is still holding up in both the manufacturing and services sectors although has fallen slightly around turnover prospects over the next 12 months for both. Manufacturers are increasingly confident around profitability. However this has been falling in the service sector since the end of 2016.
Exchange rates concerns continued to ease in Q2 2017. In Q2 39% of members said that exchange rates were more of a concern than 3 months ago (51% in Q1). Inflationary pressures also eased somewhat (25% Q2 vs. 31% Q1) but remains high compared to a year ago. In Q2 2016 this figure was just 8%.
1 in 2 businesses have not changed or considered changing their business model in light of the UK’s impending exit from the EU with many adopting a ‘wait and see’ attitude as negotiations continue.
Of those that have made or considered changes, they are most likely to have (9%) or considered (28%) changing their target market(s) followed by identifying new suppliers and introducing new products /services. Around 7% have considered making changes to their business location or setting up a presence outside Northern Ireland/the UK, largely citing the Republic of Ireland as their key choice. Some members are also re-examining recruitment plans and existing/new trade partners.
Commenting on the survey results, Ann McGregor, Chief Executive of NI Chamber, said:
“This quarter’s results indicate that there is continued business growth in the region – albeit slow. The survey also highlights three key challenges facing businesses at the moment – inflation, recruitment difficulties and Brexit.
“In terms of inflation, pressure on prices are likely to keep rising in the coming months as the recent sizeable increases in the cost of raw materials and other overheads filter through supply chains.
“Hiring staff with the right skills continues to be a major problem for businesses with 1 in four saying it had resulted in lower productivity. Low productivity has been a persistent feature of the Northern Ireland economy for many years now and despite a number of economic strategies attempting to address this, the gap is continuing to widen.
“Brexit is another concern for businesses who are unable to prepare for what lies ahead because no firm direction has been given on how future relations between the UK and the EU will work. They are effectively shadow boxing in an atmosphere of uncertainty which, for many, means putting plans for growth on hold.
“Added to this, without an Executive in place and talks between Northern Ireland’s two main political parties on hold, Northern Ireland remains outside the critical discussions on Brexit.
“There are major issues for the local economy to face – the lack of an Executive at Stormont is becoming increasingly frustrating. In what is becoming a tired plea, we ask that our parties resume talks and reach a positive outcome as soon as possible.”
Brian Murphy, Partner at BDO Northern Ireland said:
“The recruitment difficulties reported by many members is troubling and is further compounded by a lack of clarity on the future status of EU labour. The strength and depth of our workforce is rightly identified as a core concern. The quality of talent in Northern Ireland has always been a high performing asset, but there are concerns that a skills shortage is evolving.
“While we do not know what lies ahead in the Brexit negotiations, the reality is that we will need a trained, highly skilled and diverse workforce which can flex with the needs of the economy and the priorities of business if we are to thrive in a post-Brexit world.”
He added: “At a time when businesses are finding it tough to recruit people with the right skills into their workforce, it is vitally important to shape an economy that makes the most of its talented people and creates a smooth and supported route into employment.”