Catering, construction and care sectors all report difficulty hiring EU staff, mainly thanks to the weak pound. Is Britain ready for what may be unleashed this week?
According to industry groups and business owners, it is becoming increasingly hard to attract this kind of employee to Britain because of the collapse in the pound. The slump in sterling since 23 June last year is eroding potential earnings, and uncertainty over the eventual status of EU nationals has not helped.
Meanwhile, Britain’s continental workforce is holding another referendum, but this time with its feet. For instance, a record number of nurses from the EU are already quitting the NHS, it emerged last week.
The haemorrhaging of foreign staff is being blamed on Theresa May’s failure to offer assurances to EU workers living in the UK. It is likely to get worse once the prime minister has triggered article 50 – expected on Wednesday – to kickstart the two-year process for Britain to leave the EU.
Official figures reveal that the number of EU-born workers in the UK fell by 50,000 between October and December to 2.3 million, in a decline led by people working in banking, the public sector and construction.
A shortage of labour is starting to be felt across the economy, from construction, farming and manufacturing to care homes, hotels and restaurants. While the number of EU nationals leaving is limited at present, many businesses, according to the Bank of England, are having trouble hiring from abroad. Some are renting houses for employees or providing minibuses to ferry people to work, as ways of attracting desperately needed staff.
Amid fears that the trickle of departing European workers will become a flood, the search is on for solutions. One of them is investment in a phenomenon that will dominate all discussion of jobs and pay in the years to come: automation. Thinktank the Resolution Foundation says sectors that are heavily reliant on lower-paid migrant workers, such as agriculture, construction and food manufacturing, could invest more in machinery and robotics to fill the employment gap. This should lead to productivity – output per hour worked – rising and taking pay up with it, achieving one of Philip Hammond’s more elusive goals. But other industries will need to train more British employees to plug the gap, which could take several years.
Last week the latest report from the Bank of England’s agents, who toured the country between late November and late February talking to hundreds of businesses, found that construction, engineering, distribution, IT, healthcare and catering “most often reported hiring difficulties”. They found that some EU workers had left because the fall in sterling had reduced the value of earnings they send home. “However, there were more reports of difficulties recruiting new EU migrant workers, due to a shrinking pool of candidates.”
Ufi Ibrahim, chief executive of the British Hospitality Association, echoed those findings. “Some of our members have reported it is becoming harder to hire chefs from outside the UK, as many are being put off by the government’s unwillingness to confirm the rights of EU citizens already living [here].”
Workforces in hotels and restaurants, manufacturers and transport are made up, respectively, of 33%, 23% and 20% non-UK nationals, according to human resources consultancy Mercer, where partner Gary Simmons says Brexit is taking place on top of a four-year decline in numbers of British-born workers. He says: “Since 2013, the UK-born workforce has been declining as people retire, and we can see how reliant certain industries are on overseas workers filling the gaps. The UK is likely to impose more stringent migration controls… Every company in every sector in the UK will be competing for a reduced pool of available workers.”
Arcadis, a construction consultancy, says the end of free movement of labour and the introduction of a visa system could easily add hundreds of thousands of pounds to individual companies’ costs. At Arcadis alone, 5% of a 4,000-strong UK workforce hail from the EU. Assuming a three-year visa cost of £3,000 plus the Home Office’s new skills surcharge of £1,000 a year, this would mean hiring 200 EU workers would come with a £1.2m bill. Hiring a chef, a fruit-picker or a builder is about to get more expensive.
These are the UK sectors most affected by Brexit and its impact on the workforce.
British fruit farmers have been able to recruit enough seasonal workers for this summer, but have had fewer applicants to choose from. Laurence Olins, chairman of trade body British Summer Fruits (BSF), said that where a job previously attracted 10 applicants, this year there were only three or four.
“There is less choice for employers. We may get the numbers but not the quality we had before,” he says. According to Olins, the main culprit is the 12% fall in sterling against the euro since the Brexit vote.
“They [EU workers] are suffering a big pay cut, even though pay has gone up with the increase in the living wage, because it converts to less in euros. We are in big competition with European countries like Germany and Holland, where there are no currency issues.”
The fruit-farming industry employs 29,000 seasonal workers, who go back to their home countries after six to nine months in the UK. Virtually all of them come from the EU, mainly Romania and Bulgaria, but also Poland and Hungary. Horticulture overall relies on 85,000 seasonal workers.
“We are very concerned about 2018 and 2019,” Olins added. “There is no scheme being put in place, but we have to live one year at a time.”
The National Farmers’ Union is pushing for a special visa system for seasonal workers on farms. BSF warns that growers could otherwise sell up and move their operations to France or elsewhere in the EU
Hotels and restaurants
Hotels, cafes and restaurants rely heavily on non-UK workers. Just one in 50 applicants for jobs at Pret A Manger is British, and the sandwich chain has said it would suffer a staff shortage if it had to turn its back on EU nationals.
Denis O’Donnell, who owns the Peruga restaurant in Stockport in Cheshire, has already felt the pinch. He says: “There has been a massive surge in demand for kitchen staff, and almost zero response to ads.”
He recounts that at the last meeting of the British Hospitality Association, “people were doing a lot of handwringing and saying: we can’t get chefs”. He adds that people are going to “ridiculous lengths” to get staff, like renting houses and bussing them in.
The obvious answer, he says, would be to pay higher wages to attract good staff, and he reckons that pay will gradually go up as Brexit becomes a reality. He jokes that if chefs were paid £100,000 – double what a head chef currently earns in London – they would still come to Britain. In the past, a lot of chefs would come from Spain and Italy, but eastern Europeans have become more common in recent times.
O’Donnell employs 24 people, including 10 full-time staff. Of those, four are EU nationals: an Italian husband and wife team, one of whom is maître d’; plus a Latvian and a Hungarian kitchen porter. He says these two are “good, solid, reliable guys in their 60s. You won’t get English guys in their 60s doing this job.”
Total workers: 2.4 million
UK-born: 2.1 million
The Royal Institution of Chartered Surveyors (Rics) says the construction industry could lose more than 175,000 employees – or 8% of the sector’s workforce – if the UK loses access to the European single market. This could put key projects, such as the HS2 rail link between London, the Midlands and northern England, at risk.
Ted Ayres, chief executive of the Newcastle-based builder, said: “The big thing for the construction industry is we have a reliance on overseas labour. Will it [article 50] have any impact on people not wanting to live in the UK or will it stop further people coming to the UK to help us meet the housing demand? We’re not going to be able to build the number of units completely off the UK workforce.”
At Bellway and other housebuilders, about 70% of the workforce on London sites are from abroad. Several major housebuilders are understood to be concerned that some EU workers have not returned after the Christmas break.
Rob Tincknell, chief executive of the Battersea Power Station Development Company, recently told the Times that one housebuilder had 15,000 workers on site before Christmas and only 11,000 came back after the break.
A spokesman for Redrow, another big housebuilder, says its workforce is “a real league of nations. We are not seeing panic or a great exodus, but there is no room for complacency. It’s something we need to keep an eye on.”
Total workers: 3.4 million
UK-born: 2.6 million
Non-EU born: 417,000
EEF, the manufacturers’ organisation, has also reported some EU workers going home for Christmas and not coming back. The food and drink industry, the largest UK manufacturing sector, employs 115,000 EU nationals.
Ian Wright, director general at the Food and Drink Federation (FDF), says members reported in a survey at the end of last year that their EU employees felt “unwanted and uncomfortable”. One in 12 manufacturers with EU employees had said some of their workers were planning to leave the UK.
Wright adds: “Our members have also said they’re having difficulty recruiting EU nationals for certain roles. We face a skills gap, and require access to these employees to remain competitive. They are vital to keeping the UK fed. If you can’t feed a country, you haven’t got a country.”