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Recent reports highlight the importance of international labour in our Manufacturing, Fintech and IT businesses. Skills gaps represent  growing and potentially existential risks due to Brexit. 

The combination of a shrinking pool of potential EU workers here in the UK, a squeeze on visa accessibility and what seems to be a systemic undercount of non-UK nationals all add up to rough times ahead for businesses in sourcing and retaining a capable workforce…

International Labour a big issue for Manufacturing, Fintech and IT

The EEF reports that the proportion of EU workers in manufacturing businesses has fallen in the last year from 11 to 9%, a fall of nearly one fifth, whilst non-EU employees represent a steady 2%.  Fewer than one fifth of manufacturing employers said they had no EU staff. Furthermore, the EEF has uncovered evidence that businesses routinely undercount non-UK nationals by not fully considering those on secondments, assignments and expat contracts. Taking these into account may significantly raise the number of international staff in play.

The Fintech industry is even more reliant on non-UK staff, reports Innovation Finance, with a proportion of 28% EEA and 14% non-EEA staff members.

Both sectors report that IT skills are an area with particularly acute shortages.

A shrinking pool

Net EU migration has fallen to 90,000 in the last year and the number of EU workers in the UK has fallen for the first time since 2010, reports The Sunday Times. The trend in Manufacturing of reducing job applications from overseas and more non- UK employees leaving, first reported last year, has continued this year.

There is also a squeeze on visas for non-EU migrants. More than 50% of Tier 2 visa applications for IT specialists and engineers between December and February were rejected because the Government cap had been exceeded, CASE reports. The typical refusal rate for Fintech companies stands today at 13%.

This means that businesses are having to work even harder to attract and secure the international skills they need.

Threats to business

Missing skills in the workforce represent a risk to productivity and growth. For the Fintech business this becomes particularly clear when one recognises that 54% of venture capital comes from non-UK domiciled sources and 67% of businesses said that their business was able to scale up largely due to EEA migrants being involved in the founding process. The UK is currently the second most popular location for Fintech investments and this could change if the skills base is not right.

How is business responding?

Twenty percent of manufacturing companies said they were increasing salaries and benefits for all employees. Nearly half reported increasing training for existing staff and 37% reported increasing apprenticeships and graduate programmes. However, it was recognised that this might support entry level roles, but not the more skilled or senior ones, where most pressure is being felt today.

There is an expectation that the difficulties in hiring EEA employees could come to resemble those of non-EEA immigration today. Worryingly, only one Fintech company said they would respond to this by hiring more UK staff. The most common answer was that they would most likely relocate some or all activities abroad.

What more can businesses do?

  • Businesses need to be more aware of their reliance on international labour. It’s worth gathering data about nationality and residence status of your employees, and don’t forget to include those here for short secondments, assignments or as expats.

 

  • Talk to your international employees and find out about their concerns. There are indications from the Government that it may be relatively easy for EU citizens to gain settled status, but uncertainty around this is a big worry factor. Let your employees know about developments in this area and how you can help.

 

  • Consider developing specialist programmes to attract, support and retain your international employees. Targeting non-salary development opportunities to this group has the additional advantage of not creating a wage inflation problem across the whole workforce. Investing in professional development for these employees demonstrates your commitment to them and promotes engagement.

 

  • Don’t forget that for this group, the happiness and wellbeing of spouses and children can be crucial to preventing flight. Coaching, training and community support for the employee and his or her family might make all the difference.