Company insolvencies are rising at an alarming rate, as we’ve covered in this previous blog. You don’t have to look too hard to understand the reasons why. A toxic cocktail of soaring inflation, sky-high energy and material costs, plus the end of government COVID protections is pushing hundreds of businesses across the UK over the precipice.
But there’s another elephant in the room that it’s important not to ignore – staff shortages. Across the board, UK businesses are struggling to find the people they need to kick start their business again after the pandemic. For the first time in history, official figures show that there are more job vacancies than people looking for work.
According to Bank of England estimates, there are currently 900,000 fewer workers in the UK labour force than were forecast for this year prior to the pandemic. The main reasons are a combination of Brexit driving EU workers home, and the fact that some 450,000 people – mostly over 50s – have simply decided not to return to the workplace after being laid off or furloughed because of COVID.
A downward spiral
This is a worrying state of affairs for the economy. Certain industries are being hit harder than others. The hospitality sector, for example, is struggling to tempt back workers after pubs, bars, restaurants and hotels shed staff en masse during lockdowns. Similarly, the airline industry has faced well-documented chaos this summer as understaffed airports and airlines have struggled to cope with a surge in traveller demand after the lifting of restrictions.
But understaffing is a concern across the board. It caps productivity, it leads to substandard service which drives away custom, and it puts the remaining workforce under huge strain. Overworked, unhappy employees are themselves highly likely to leave. It’s a vicious downward spiral of decline.
The end result is, as we are seeing, businesses not being able to continue trading. A pub or restaurant that does not have enough staff to meet demand cannot serve enough meals or drinks to remain viable. In the airline industry, staff shortages are creating massive financial strain in the form of refunds and compensation carriers have to pay out for every cancelled flight.
Perhaps the most stark illustration of the impact this is having is the fact that 90% of all insolvency filings at present are company voluntary liquidations, or businesses deciding to give up and shut up shop. That’s an unprecedented figure in the past six decades.
Casting a wider net
To put it simply, businesses depend on their people to survive. If you find yourself struggling for staff, it puts you in a difficult position, with the long term health of your business at stake. But there are a number of things you can do proactively to find a solution.
First, look at your recruitment practices. Are you doing everything you can to make your business as attractive as possible to prospective recruits? Are there better incentives you could offer? Can you offer more flexible hours and conditions to suit different people? Can you reach a broader audience by advertising in different places and in different ways, such as on social media? And if the nature of your business allows it, can you reach potential workers further afield by offering remote working?
Second, if you are finding recruitment difficult, your other option is to see if you can rationalise your business to work more effectively with what you already have. This isn’t easy, as it may well require scaling back your operations and perhaps lowering your ambitions.
This can often be the only way you can guarantee delivering a high quality of service with fewer staff, not to mention keep workloads manageable and so look after the well-being of your workers. But it could require steps like moving to smaller premises – cutting back your operations is likely to lead to reduced revenue, which means you have to look at lowering your costs, too.
Whatever approach you take, the key piece of advice is to act now. If you are aware that you don’t have the staff you know you need to run your business at an optimum level, delay will only drag your business down. The longer you let standards decline, the longer you leave current staff overstretched and disgruntled, the harder it will be to drag things back.