Alex Tait

The latest quarterly ‘The RSM Real Economy’ report demonstrates nearly two thirds (61%) of businesses are currently finding staff recruitment ‘extremely’ or ‘very’ challenging.

The Report demonstrates that staffing challenges are hindering business growth, with around a third (34%) of businesses saying they have had to delay expansion plans as a result. Almost a third (30%) say they have turned business away, and a further 30% say they have had to close down some locations completely.

In response to the record rise in resignations, RSM’s report found employers are increasing salaries (43%) and improving staff benefits (43%) in a bid to improve retention. As remote and hybrid working becomes the norm for many employees, 71% of employers say they expect to see a permanent increase in remote working in future.

The research showed smaller businesses are suffering more than most. When it comes to these businesses in particular - defined as those with turnovers between £10m and £30m - 40% said they have had to turn business away due to staffing challenges.

According to ONS employment statistics, vacancies have reached a record high of 1.2 million, and total job-to-job moves have also increased to a high of 979,000, largely driven by resignations rather than dismissals. RSM’s report shows that while 58% of employers believe staff left for a higher salary, 57% say staff moved on for a change of lifestyle.

Jude Lean, senior HR consultant at RSM UK, commented: “The pandemic has accelerated workforce trends that were already emerging, such as the growth of the wellbeing movement and an increased desire for flexible working. It appears employees now hold more of the cards, with the record levels of vacancies, largely due to resignations, demonstrating that people are not afraid to walk if the company they work for doesn’t meet their needs. Businesses will need to safeguard the drain on knowledge that comes with this scale of resignations.”

Alex Tait, RSM’s regional managing partner for Scotland and Northern Ireland, added: “The current recruitment landscape presents a huge challenge for Scottish businesses, with many putting plans for expansion on ice, turning business away and even closing some sites completely due to a lack of skilled workers. Between Brexit, coronavirus and supply chain issues, businesses have had a lot thrown at them lately, yet despite the obvious economic and operational pressures, Scottish employers are resilient and responding by increasing salaries and reviewing benefits in a bid to retain good workers.

“Having said that, people come to work for more than just remuneration and social engagement, enjoyment and culture play a large part in retaining colleagues. In an increasingly more hybrid working environment Scottish businesses need to provide an environment that works in person and remotely.”

Tom Pugh, economist, RSM UK, commented: “Labour shortages, along with supply chain issues and the surge in energy and goods prices, have been one of the major factors holding back the economic recovery in 2021. These shortages are likely to persist through most of 2022, especially in those industries which were previously most reliant on labour from the EU as Brexit continues to make itself felt.

“Businesses should continue to invest in productivity-enhancing technology, upskilling their workforces and digital technology to allow them to access the widest possible labour pool. Indeed, we suspect that investments like these, especially in digital technology, will lead to larger productivity gains across the economy as a whole over the next decade.”

The survey was the fifth in The Real Economy series of topical quarterly surveys focusing on the middle market as the powerhouse of the UK economy. It was also used as a means of uncovering the wider workforce challenges faced by middle-market businesses. The Real Economy is the first authoritative source of economic data from this crucial area of the UK business market, sharing insight and perspective for the wider economy.