LONDON — Britain faces an impending workforce crisis, triggered by Brexit, that will cause chaos in the country’s economy in coming years, according to a new report.
Research from consultancy firm Mercer argues that Britain is already experiencing a significant shortage of labour, thanks to shifting demographics, and it will only get worse once Brexit lowers the amount of immigration into the country.
“Businesses face an unprecedented labour shortage. The impact of the UK’s ageing population on the UK economy and access to labour has been masked in recent years by positive net migration – until now,” Mercer’s latest Workforce Monitor said.
“With immigration likely to fall, organisations must take the opportunity now to get ahead in order to ensure future growth and minimise risk.
“Even without Brexit, many professions already experience a tight labour market due to demographic shifts and skills transformation activated by automation, digital and innovation,” it continued.
The key problem, Mercer argues, is that the UK’s population is ageing rapidly, meaning that fewer and fewer people as a percentage of the population will be able to work. Immigration helps to plug that hole, but when it starts to fall, the demographic shift becomes even more pronounced.
Both the government and businesses have a Herculean task ahead of them in determining how we respond to the changing shape of our society,” Mercer partner Gary Simmons said.
Mercer suggests four different future scenarios for the British labour market. First is that the economy and migration progress as expected in the years leading up to 2030:
“No change to the government’s expectation that migration drops from the current 335,000 per year to 185,000 by 2020 and thereafter. In this scenario, the total population increases 5.5 million from 65.7 million in 2016 to 71.2 in 2030 with the workforce increasing by 1.7 million from 33.4 million to 35.1 million over the same period. While the least dramatic scenario, it’s worth noting that there are already skill shortages in many industries.”
In its second scenario Mercer argues:
“The workforce increases by 1 million workers from 33.4 million in 2016 to 34.4 million in 2030. The overall population increases by 4.5 million from 65.7 million to 70.2 million meaning that fewer workers are supporting a larger population with related pressures placed on pensions and healthcare funding and compounding current skills shortages and demographic pressures.”
The scenarios get progressively worse, with Mercer’s worst case involving a fall in Britain’s working age population as both EU immigrants and Brits leave the country as a result of Brexit. Mercer calls this the “Great EU Remigration” — here is the extract (emphasis ours):
“This scenario envisages an outflow of EU-born and Non-EU born workers caused by an unwelcome social environment in the UK. This is combined with a net outflow of UK-born workers too (a group, which according to the Bank of England, historically have left the UK in higher numbers than return since records began in 1964). The UK’s working population shrinks by 700,000 to 32.6 million while the overall population increases by 2.3 million from 65.7 million to 70.2 million. The inability of certain
sectors of the UK economy to fill roles could be dramatic.”
Below is Mercer’s chart, illustrating the issues. Note that in all scenarios the ratio between people in the workforce and the size of the population diverges further by 2030: