Why is there labour shortages right now?

Overview of the tensions in Europe

Most European countries are currently facing important labour shortages, for a variety of reasons. The aim of this article is to help you understand the factors behind this trend, so that you can identify the right solutions for your business. The article includes a specific focus on the United Kingdom, to understand to what extent the post-Brexit environment contributes to these trends.

Published on 14.01.2023

unemployment rates in europe by country
What are the fundamental causes of current labour shortages?
How are labour shortages affecting economies accross the world?
In France : is there a labour shortage ?

unemployment rates in europe
by country

As for the United Kingdom, large disparities are visible in different countries.

What are the fundamental causes
of current labour shortages?

Good News first: labour shortages primarily result from strong economic growth over the past few years. The Covid-19 crisis marked a sudden stop in this positive trend, but most economies quickly picked up once restrictions had been lifted, which means most European economies are above their pre-Covid trend. In fact, the pace of the post-Covid recovery was so strong that it strongly contributed to the labour shortages and inflationary pressures apparent in most sectors of the economy. This is likely to prove long-lasting: according to Sebastian Dettmers, CEO of Stepstone, a recruitment platform, this situation is only the starting point of a worldwide skilled labour shortage.

For the UK more specifically, labour shortages also result from difficulties for UK businesses to access European talent and skills due to new post-Brexit UK immigration rules (eg. On minimum salaries or language skills)

How are labour shortages
affecting economies accross the world?

Labour shortages are forcing businesses accross the world to substantially rethink their supply chains and make material adjustments to their production processes.

In Denmark for example, 21% of Danish companies had to turn down orders because of labour shortages (Source: study initiated by the newspaper Berlingske).

This phenomenon is currently happening in Europe but also across the Atlantic in multiple sectors of the UK economy from healthcare to transports, the hotel industry or even in IT. On top of that, the wave of resignations initiated shortly after the start of the Covid-19 pandemic – dubbed the ‘’Great Resignation’’ – further worsens companies’ ability to attract and retain the right people to fulfill their operations. And this isn’t going to quickly fade away: one in five workers globally are planning to quit in 2022 (Source: PwC’s Global Workforce Hopes and Fears’ Survey of more than 52,000 workers in 44 countries and territories).

To make things worse, populations in most developed economies are ageing. Among the multiple structural consequences of this trend is the fact that it reduces the volume of working-age people, and therefore increases the competition for talent between businesses.

(Source : OCDE) The shares of people below the age of 15 in China is slowly decreasing and went from 18.66% in 2010 to 17.6% in 2021. In the European Union, it went from 18.98% in 2010 to 17.60% in 2021.

On the other hand, the evolution of people over the age of 65 went from 14.41% in 2010 to 16.83% in 2021. In the European Union, it’s more or less the same. It went from 14.41% in 2021 to 20.98% in 2021.

🇳🇱 Focus on labour shortages in the Netherlands

The unemployment rate in the Netherlands was 3.6% in July 2022 (Source: Le Monde) which is pretty low. As such, even before the Covid-19 pandemic, businesses already had substantial difficulties in finding skilled workers, especially in the healthcare sector, construction sector and in IT. With the post-pandemic recovery, labour shortages extended to all sectors, with 106 job vacancies for 100 job seekers. (Source: Le Figaro)

🇧🇪 Focus on labour shortages in Belgium

The current unemployment rate in Flanders was 5.8%, in July 2022, but this is not necessarily the cause of these shortages.

600 companies were surveyed by Voka, the employers’ federation for Belgian companies. Two out of three of the companies surveyed experience difficulties hiring staff. This phenomenon is all the more true in bigger companies (above 250 employees).

Not only will this potentially impact their turnover but also slow down their growth.

Source: VRT

🇬🇧 Focus on labour shortages in the UK

The case of the UK is quite specific because labour shortages have come at a time when the country was in the process of exiting the European Union, with new rules and a new environment affecting trade as a whole but also recruitments.

Here are some key figures to keep in mind:

The unemployment rate for people aged between 16 and 65: 3.8% between April and June 2022 (Source: Office for National Statistics)
The inactivity rate for people aged between 16 to 64 amounts to 21.4% between April and June 2022 (Source: Office for National Statistics)
Labour shortages are leading to significant salary increases in some sectors. For example, Andrew Baxter, CEO of British logistics company Europa Worldwide, estimates he had to increase wages for his lorry drivers by around 20% (Source: Le Monde)
The combination of Brexit and Covid has reduced the availability of EU talent for UK companies. Net migration of EU citizens to the UK turned negative in the year to June 2022 (Source: ONS), and even as the effects of the pandemic fade away, new migration rules are making it more complicated for EU citizens to come work for UK businesses.

The United Kingdom is currently lacking primarily lorry drivers, waiters and hotel staff, but the list is starting to extend to many other sectors in the economy.

Nord France Invest has partnered with Bob Hancké, Associate Professor in Political Economy at the London School of Economics and Political Science, and Laurenz Mathei, Founding Partner and Managing Director at the consultancy cabinet PEACS in order to create a high-value free-to-download technical report. It tackles in a comprehensive way the trading conditions between the EU and the UK after Brexit.

According to the authors, one of the most affected industries is the services sector. Changes to immigration rules now require EU citizens to have a Visa and a work permit in order to be able to work in the UK. This is long and time-consuming for any recruitment process.

To give you a bit of perspective: “A band of five musicians on a tour through six EU countries, for instance, might need to file up to 60 individual forms (5 people X 6 countries X 2 forms, one for visa and the other for work permit) and often deal with multiple national authorities with varying abilities of swift application processing”

In addition, so far there is no recognition for certain regulated professions, such as lawyers. As such, if the EU do not negotiate bilateral recognition agreements, individuals will need to re-qualify.

A survey initiated the French Chamber of Great Britain in 2022 highlighted that 65% of the respondents thought tougher access to EU talents and the additional costs these recruitments imply were the main consequences of Brexit. In addition, 17.6% of them reduced their number of staff due to Brexit and 12.2% of them plan on doing this in the next 12 months.

Focus on the finance sector

For instance, the finance sector is heavily reliant on non-British workers, which accounts for 19.5% of staff in the industry. According to Vis Raghavan, Deputy CEO of JP Morgan, a shrinking talent pool combined with the relocation of a great number of professionals illustrate the current crisis the financial sector is facing. (Source: Les Echos)

This is the result of longer and costlier processes to obtain a Visa. Indeed, companies have to pay in advance £1,000-per-year Immigration Skills Charge for the Visa (Source: Les Echos)

The impact of labour shortages on investments

Ultimately, the current labour shortages in Europe will have or are already having a substantial impact of companies’ global turnover which can result in steep declines in investments.

Indeed, 22% of companies specialised in finance in the UK consider these labour shortages to be a constraint to their investments.

According to that same survey:

22% of companies specialised in finance in the UK consider these labour shortages to be a constraint for their investments. (Source: Les Echos)
5% of the companies who participated reduced their investments in the UK due to Brexit in general (Source: Franco British Business Dashboard)
12% are planning on doing the next 12 months (Source: Franco British Business Dashboard)

In addition, the survey highlights the decline of jobs created by foreign companies’ investments in the UK:

Source : Franco British Business Dashboard (2022)

In France:
Is there a labour shortage

France is one of the few countries that has been spared from severe labour shortages.

To give you a little bit of perspective, during the second half of the year 2021, there was 7.5 job vacancies for 100 unemployed people. (Source: Les Echos)

The particular case of the Hauts-de-France Region

Now let’s focus on the case of Northern France. It is located an hour and twenty minutes away from London by train, an hour away from Paris and even 35 minutes away from Brussels.

The unemployment rate in Hauts-de-France during the first trimester of 2022 was 8.7% which is the highest in France and equals the one from the Occitania Region (Source: Insee).

Here are the numbers of workers immediately available in different sectors (Source: Pôle emploi):

job-seekers in industry

job-seekers in logistics

job-seekers in services

Highly skilled workforce

First and foremost, Hauts-de-France offers a wide range of schools, universities and training institutions:

7 universities
More than 40 specialized training centres. Among them, 21 engineering schools, 16 business schools and last but not least, 67 specialized schools (in art, design, communication, journalism, architecture and multimedia)
10% of engineers in France are trained in Hauts-de-France
Training programs completely tailored to HR needs

9% of the student population is located in the region, which represents more than 230.000 students, making the Hauts-de-France, the second French region for education. (Source: Ministère de l’Enseignement supérieur, de la recherche et de l’Innovation)

🔎 Discover more about access to talent and skills in Hauts-de-France

Hauts-de-France’s worforce trusted by big companies

According to David Caron, factory director for Häagen Dazs, one of the main reasons why the company chose the Hauts-de-France for setting up is for the quality of its workforce as well as its availability.

“The workforce in Hauts-de-France is known for its commitment to work as well as its company loyalty”

Northern France has all the assets to ensure sustainable growth

Every European country has been affected to some extent by labour shortages. Overall, this will also have a noticeable impact on companies’ turnover which can result in a decline in investments. For the United Kingdom, these trends have been compounded by challenges resulting from changes in UK-EU trade rules and new requirements for visas and work permits.

France is one of the few countries that has been spared. The Hauts-de-France in particular represents a safe haven for companies in search of development opportunities. The Region appears to be the safest option for UK companies who wish to continue accessing EU markets and talents.

Nord France Invest is the Investment Promotion Agency for Hauts-de-France and provides the right assistance – completely free of charge and in a confidential manner – to foreign-owned companies who may want to set-up here.

Do not hesitate to contact us if you have any perspective of growing your business in Northern France.