The lack of skills is hitting growth. “We’re absolutely hearing from our members that skills and labour shortages are holding their businesses back,” says Hall-Chen. “It is slowly getting worse.”
According to the British Chambers of Commerce (BCC), nearly two thirds of firms are struggling with a skills shortage. “The brutal numbers tell the brutal truth,” says Baroness Lane-Fox, president of the BCC and co-founder of Last Minute.
What could change under a Labour government? Sir Keir Starmer has outlined a New Deal for Working People, which includes introducing day-one rights, ending the usual qualifying periods for rights such as sick pay and parental leave Labour hopes it will encourage more people to work.
“We’re talking about jobs where there are enough people who are able to do those jobs, but they just don’t want to do those jobs. If you ask why not, it’s always about pay and conditions,” says Alan Manning, professor at the London School of Economics (LSE) and former chairman of the Government’s Migration Advisory Committee.
Businesses are open to reform, but there are concerns about increased costs and reduced flexibility in the labour market, says Hall-Chen.
“From our clients’ perspective, the big question is around, ‘What is my risk going to look like going forward? How should I manage that risk? And what is going to be my best path to bring in new talent?’” says Michael Stull, country manager at ManpowerGroup UK, one of Britain’s biggest recruitment agencies.
Day-one rights will increase the cost of making a hiring mistake, he adds.
Insiders say there will likely be wiggle room during the consultation process as Labour will take pains to avoid unintended consequences. “It’s clear that the union-dominated era of Jeremy Corbyn’s leadership is very much gone,” says one former staffer.
What is clear is that without major intervention, the skills shortage will only get worse.
The number of 16 to 24-year-olds not in employment, education or training (Neets) has surged by 137,000 since the pandemic began to hit 900,000 in the first three months of this year, according to the Office for National Statistics (ONS).
This was the highest number in nearly a decade and means more than one in every eight people in this age group is participating in neither the workforce nor the education system.
School absence has increased since Covid, while attainment has dropped. The share of pupils meeting expected standards when they leave primary school in England is in decline, falling from 65pc in 2019 to 60pc in 2023.
The skills gap also has an insidious feedback loop. It is taking a toll on the existing workforce. BCC research found that 68pc of companies have increased the workload of their employees.
A lack of skills in a team hits morale and well-being, says Lane-Fox.
“If you’re working in a team that is not staffed properly, more work might be falling on you, or you can’t get things done, or you don’t have the skills to do what you need to do. That must be a real confidence knock on you,” she says.
A large chunk of the rise in economic inactivity is because Britain is getting sicker. The number of people out of the workforce because they were long-term sick hit a new record high of 2.83 million between February and April, up 718,000 since the pandemic began.