How to prep for a post-Brexit talent pipeline

The UK’s withdrawal from the EU would exacerbate a talent shortage in Britain, restricting access to skilled workers from across the EU amid an existing skills gap and an exodus of ageing workers from the workforce.

Between 2016 and 2030, the UK’s population will grow between 3% and 5% faster than its workforce, according to Mercer’s workforce monitor report, a situation which has not been seen in the UK since the 1950s and 1960s.  

By 2030, there will be an extra 3.5 million people over age 65, which has implications for individual consumption and corporate taxation to pay for health care and pensions, explained Gary Simmons, a Mercer partner and author of the report.

In recent years, the impact of the UK’s ageing population on access to labour has been masked by positive net migration, according to the report. Post-Brexit, the cost of health care and pensions will rise faster than long-term economic growth.

Access to fewer workers with the skills a business needs to fulfil its strategy would have a negative impact on productivity. More broadly, GDP growth would also be curtailed. A worsening talent shortage would also lead to upward pressure on wages, the Mercer report notes, which would be a good thing for top talent but an increased expense for companies operating in the UK.

Members of Parliament are in the process of negotiating how to exit the EU.

Among the various agreements the government will aim to secure during negotiations with the EU, access to talent is the main priority amongst business leaders, according to a separate survey by Ipsos Mori. Movement of, or access to, skilled labour was the primary concern for 54% of respondents. Next on the list was securing access to free trade or the single market, prioritised by 47% of those polled. The survey suggests that the prospect of leaving the EU has dented the confidence of FTSE 500 leaders.

• Fifty-eight per cent of respondents stated that since the referendum, the decision to leave has had a negative impact on their business.
• Sixty-six per cent felt that the situation for their company will be more negative in 12 months’ time. In contrast, 13% expect their business will benefit.
• However, 96% of respondents are confident that their businesses will be able to adapt to the new circumstances once Britain leaves the EU, and more than two-thirds have taken steps to mitigate the effects. These include putting contingency plans in place and analysing the impact of various potential outcomes of the negotiations (14%), moving business outside the UK (10%), monitoring currency fluctuations (7%), and providing reassurance to staff who are not UK nationals (7%).
• Asked what would be crucial to their businesses remaining successful in a post-Brexit UK, 86% of those polled identified reducing the level and complexity of regulation, and the same percentage said “keeping it easy to recruit EU staff.”

The government’s white paper, published on February 2nd, gives little detail on any new immigration arrangements for EU nationals, but it does indicate that any changes would be phased in to “give businesses and individuals enough time to plan and prepare for those new arrangements.”

Developing a strategy to tackle the workforce crisis

Although companies are aware of the tight labour markets in certain sectors such as tech and engineering, few may realise the wider extent of the problem. “Up to now, they have been able to go out into the external market and buy the skills they need, at the market price,” Simmons said.

That’s becoming tougher. Some companies have become concerned about the external supply of talent, and particularly their EU migrant labour force in the context of Brexit, with some reporting that a number of EU national staff are starting to return to their home country, he added.

The biggest factor influencing the size of the UK workforce in the coming years will be migration flows, Simmons said. He encourages organisations to consider their talent pipeline.

“Workforce planning is difficult because the demand side takes a lot of effort to work through,” he said. “What companies are going to need in three years, five years, ten years. What skills, what people?

“It requires companies to adopt a medium-long-term view, as it takes a lot of time to acquire and train people. But it is an essential ingredient in corporate long-term planning because the workforce is a key part of the capital of the business.”

Such an exercise should be run by the HR director, but led by the CEO and with input from the CFO as it is so bound up with the operating model and the strategy, Simmons added.

In this context, Mercer recommend that businesses seek to understand the skills they will need in the future and assess the likely availability of those skills in the UK workforce. Explore the following questions:

What digital skills do we need now and in the future? Develop the skills required to manage technological disruption in our industry/organisation that are not readily available in the labour market. Invest in the capabilities and technology required to collect, analyse, and act on the big data available to us. Ensure managers are aware of the value big data can bring to your organisation and are comfortable using it in decision-making.

What are our retirement risks? What skills and knowledge are we likely to lose? Put a succession plan in place to ensure capture of institutionally valuable knowledge.

Which roles are critical to our operations? Identify the critical skills and roles in your organisation. Take steps to understand what existing employees in these roles value, with a view to retaining them.

What resources do we have in our wider talent pool? Organisations should be aware of the potential within, and be ready to draw on, the external talent pool available to them, including freelance associates, contractors, and joint venture partners.

—Samantha White (Samantha.White@aicpa-cima.com) is a CGMA Magazine senior editor.