"Some businesses may be tempted to relocate outside the UK if the labour shortage becomes a serious issue and, in the long-term, a move towards greater automation may be an option for larger businesses"
Mark Thornton, Maginus COO
There is an abundance of discourse surrounding Brexit, yet none is as controversial or polarises opinion as much as Britain’s future immigration policy. Whilst David Davis and Michel Barnier attempt to negotiate Brexit terms, the uncertainty created by the EU referendum among Britain’s migrant workforce is reverberating around the labour market.
Figures from the Office of National Statistics (ONS) provide the fullest picture of the effect of the EU referendum on migration to date. Providing an insight into the movement of people out of the UK since the vote, the most recent ONS Migration Statistics Quarterly Report (published in August) shows that net migration in the year to March 2017 was 246,000 - a decrease of 81,000 compared with the previous year. Two-thirds of this was due to EU net migration.
With net migration falling and UK unemployment at a record low of 4.3%, there are simply not enough workers available to fill low-skilled roles. There is a risk that small businesses who find themselves unable to hire labour, will simply collapse while consumers may see a reduction in customer service levels as the logistics involved in providing same-day and next-day delivery becomes an unviable option.
UK retailers sent an estimated 1.184 billion parcels through UK carrier networks in 2016 according to the IMRG-MetaPack January delivery index. All of these orders needed to be picked, packed and despatched and, with retailers offering same-day and next-day delivery in an attempt to gain consumer sales in a crowded market, there is massive pressure on the carrier network. It is easy to see how the substantial shortage of low-skilled labour could mean that many of these parcels will not be delivered as promised.
The UK’s increasing dependency on EU labour is reflected in statistics that highlight the increase in the number of EU nationals moving to the UK over the last decade. According to the Recruitment and Employment Confederation (REC), between 2005 and 2016 the number of EU nationals resident in the UK tripled from 1.2 million to 3.6 million. Reasons that EU workers in low-skilled roles give for wanting to work in the UK include: ‘recommendation and connections through family and friends, pay compared with EU countries, job opportunities, working culture and conditions and British culture more widely’.
In the wake of the EU referendum, some of the key features that helped to attract EU citizens to the UK in large numbers are at risk of disappearing and, while the REC acknowledges that EU labour levels were declining in the UK before the EU referendum due to factors such as the falling value of the pound and the improving economies of some EU countries, there can be no escaping the fact that the EU referendum has exacerbated the problem significantly.
In 2016, the EU labour pool accounted for 7% of the UK workforce, with an estimated 2.2 million EU nationals in employment. A government report highlights that, between 2004 and 2016, the UK’s food manufacturing sector, construction industry and warehousing and transport markets were the chief beneficiaries of the influx of EU labour. These sectors rely on quick and easy access to a pool of workers, which means any reduction in the number of EU citizens entering the UK labour market coupled with the limited supply of indigenous workers (thanks, in the main, to current high employment levels), will become a big problem for them.
Of course, you don’t have to be an economist to realise that attempting to solve the issues created by a reduction in labour by pushing up wages will only result in increased prices for consumers. This, in turn, could affect consumer spending which would lead to a decrease in demand for a wide range of products.
It has been suggested that some businesses may be tempted to relocate outside the UK if the labour shortage becomes a serious issue and, in the long-term, a move towards greater automation may be an option for larger businesses looking to fill the skills gap.
However, with Christmas 2018 around the corner, the timescales involved in implementing IT solutions to address the issues for this year’s peak period are not feasible. Still, planning now is prudent as achieving successful order fulfilment at Christmas and throughout the year depends on having a seamless, integrated supply chain gained through the implementation of an IT solution that provides automation. Decide which solution to implement and begin the project now, to ensure that you are prepared for the future.
The warehouse and logistics sector and, indeed every part of the business community, must lobby the government to ensure that the UK gets an immigration policy capable of delivering a stable and sustainable workforce to fill the roles that are essential for many daily operations and does not affect seasonal workers so that businesses are able to cope with the demands that peak periods place upon them.
With less than two years to go until Brexit, the uncertainty created by the referendum must be addressed. EU nationals must be given some assurances about their future prospects in the UK, before ‘Brexodus’ gains further momentum and we witness a deepening of the workforce shortage crisis.
And logistics businesses must look at the resources they have for the coming peak and optimise them to ensure that Christmas 2018 is delivered and the tears and tantrums that are sure to follow if that longed-for Christmas gift doesn’t materialise on the big day, are to be avoided.