Labour crunch hitting home

If we went back in time to the 1970s or 80s, Northern Ireland was throwing money to attract single investors like DeLorean to help address chronic unemployment. Even getting them interested in speculative visits was a difficult ask and for many, no amount of sweeteners made investing in NI an attractive proposition.

Fast forward to 2023 and we don’t appear to have much difficulty getting investors’ attention, based on the numbers attending the recent summit in Belfast. And we heard some impressive investment announcements off the back of the event, including EY creating 1,000 jobs over the next five years. The problem today is clearly not investor demand, nor unemployment. The biggest challenge is actually supplying and retaining the skilled labour these firms need.

Recruitment difficulties and skills shortages have become the new normal in Northern Ireland for a whole variety of reasons. The most talked about of these include changes in people’s lifestyles as a result of the pandemic and fewer EU migrants as a result of Brexit. However, there are also underlying trends at play that would have come to the fore regardless of Covid and Brexit. This has all combined to create the labour supply crunch we’re experiencing today.

Since 2020, the overall potential workforce (16-64-year-olds) has been falling, primarily due to long-term demographic trends, linked to a lower birth rate and lower levels of net migration. Within this smaller overall potential workforce, we have also recently seen a drop in the number of people wanting to work. Increasingly, amongst the cohort of people willing to work, there is also a desire to work fewer hours or days. The upshot of all of this is a significant decline in the supply of labour to meet the needs of employers.

Added to this has been the phenomenon of remote working, which has been positive for some companies, but has seen a hit to productivity at others. Technology has also enabled our shrinking working-age population to do jobs elsewhere without physically leaving NI.

Spare a thought for indigenous companies in sectors such as cyber security who are already contending with huge skills shortages and now also have to compete for talent with EY as they seek to fill 1,000 new positions.

We heard so much during the investment summit about how international investors have a choice of locations around the world to pick from and there is the need to work hard to attract them. The same is true today of our workforce. In many cases, they have their choice of employers. Companies, local and international are therefore having to work increasingly hard to attract and retain talent.

But some businesses in some sectors have come to the conclusion that the skilled workers they need just don’t exist anymore and if they can’t outsource the work to other parts of the world, they are reverting to either automation or bringing in more and more workers to NI from the likes of the Philippines and India. But housing these migrant workers could be a significant problem.

Indeed, the availability and affordability of housing is increasingly impacting on labour supply.  This isn’t just for new migrant workers, this is for graduates and workers already here. Many people can’t find affordable housing within reasonable distance of their chosen place of work. Others can no longer afford housing costs at all based on the salaries they are able to earn here and are perhaps moving outside of NI as a result. The shrinking stock of suitable rental properties – linked in part to the growth of Airbnb – is a particular problem, helping create a rental crunch. According to PropertyPal, the stock of rental properties listed has more than halved since 2019. The number of enquiries per rental property has increased from an average of 19 to 89.

The recent investment summit was great to see and seemed to be a real success in terms of pitching NI to the international business community at a challenging time. But the reality is that this good work could be in part undone by issues elsewhere in our economy, including the lack of skills and the growing housing supply shortage. There was a lot of talk during the summit about how the perceived lack of stability linked to not having an NI Executive could put off investors. This has perhaps proved to be unfounded. But the longer-term impact of not having an Executive to address issues like skills deficits and the emerging housing supply crisis will be a much bigger issue for them.

This article appeared today in the Irish News Business Insight supplement

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