Recruitment sector Finance Director tips – how to mitigate against Brexit-induced labour shortages
The recruitment sector always struggles to operate at full capacity when faced with a shortage of labour, and unfortunately, headlines about the nationwide labour shortage dominated for a large part of 2021. From hospitality to logistics, construction to agriculture, industry and sector leaders are voicing concern that difficulties with finding and keeping staff will continue well into 2022.
In the last year we have seen record highs in job vacancies and according to the REC, nine in ten recruiters (88%) say that labour shortages are their biggest concern; skill shortages are also a major concern for two in three (65%). And sectors which have typically relied on workers from the EU in larger volumes – agriculture is a prime example – have struggled significantly.
Clearly the pandemic has had a major impact, and in the early months, many EU nationals simply returned home as the crisis took hold. Although the UK left the EU on 31 January 2020, Brexit transition arrangements delayed changes to the status and immigration rights of European nationals in the UK until after 30 June 2021. Once new rules eventually came into force, many who had previously worked in the UK could no longer do so easily. Until 30 June 2021, acceptable documents for EU citizens proving their Right to Work in the UK simply included their passport or national ID card, as well as the document certifying Permanent Residence or their Registration Certificate to evidence their Right to Work. Now, the UK operates a points-based system and non UK nationals must apply for a visa to be able to work.
Nearly half of recruiters surveyed by the REC at the end of 2021 said that right to work changes for EU workers are affecting their ability to place suitable candidates. And 56% also cited the current immigration system as compounding the problem.
The potent combination of the pandemic and Brexit has caused a major restructuring of economic activity in the UK. Employment may well be back to pre-pandemic levels, however total hours worked and output are not. This is understandably having a huge impact across the recruitment sector.
The Finance Director (FD) perspective
When supply and demand fluctuations are in play, recruitment agency FDs must be on high alert, looking out for issues which are affecting business financial performance and taking steps to respond quickly to limit the impact.
In the face of persistent labour shortages coupled with an uptick in the volume of vacancies, recruiters will find themselves with a larger workload of jobs to fill and a much smaller pool of candidates to choose from. The knock-on effect is that it takes longer to fill some vacancies, and that in turn impacts productivity and therefore profitability.
The other key issue is that in times of economic uncertainty, it is common for customers to change their payment profile, perhaps taking longer to pay due to their own cashflow issues and the fact that their productivity can also be detrimentally impacted by their staff shortages.
3 practical ways recruitment FDs can take decisive action
1. Ramp up your risk management activity
By investing in risk management tools, your business can easily avoid those customers that are more likely to be later payers or bad debtors.
2. Keep your consultants informed
When candidates are in short supply, make sure your consultants are placing them with the customers that pay fastest – protecting your cashflow in the process. By giving your consultants greater visibility of payment data and enabling collaboration across departments, they will be able to make better decisions about who to deal with.
3. Stay on top of the data
It’s much easier to make faster and smarter decisions with the full picture – and that is wholly dependent on having an up-to-date finance system. Real time data is vital for confident decision-making; and one centralised data store ensures only one version of the truth is available at all times.
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