- Workplace skills shortage - possible threat to business optimism
Lack of skilled workers as a constraint has increased to the highest quarterly level ever.
New figures from Grant Thornton’s International Business Report (IBR), a long-running global survey of 2,500 businesses in 36 economies, reveal that while business optimism is rising to new quarterly highs, a storm may be brewing in the shape of a skilled worker shortage. In addition to high business optimism, the survey finds increases in revenue and profitability expectations. However, growing fears over workforce skills could impact confidence.
The findings show that global business optimism hit at an all time quarterly high of +51% in the second quarter of this year. This represents five consecutive quarters of increases in optimism. Healthy confidence is evident in the US, where optimism has hit an all-time high of 81%; in the EU, which has jumped to a two year high (50%); and in China, where optimism remains at 48% - a near three year high.
Underpinning this, global revenue expectations also equal their all-time quarterly high of 56%, as do expectations around increased profitability (47%). However, a less welcome milestone is also set this quarter. The percentage of businesses who identify a lack of skilled workers as a constraint has increased to just over one in three (35%) - its equal highest quarterly level ever.
Francesca Lagerberg, Global leader at Grant Thornton, comments: “It would be easy to analyse these figures as unbroken good news for the global business community. Optimism levels are at unseen-before highs, and firms expect to boost revenue and profits in record numbers too. A small uptick in export plans also reflects the fact that global trade levels are currently strong.
“But there is a major warning light flashing, in the shape of a skilled worker shortage. Despite firms telling us they plan to hire more staff, we’ve seen a steady increase in fears that a lack of skilled workers could hamper future growth.
“The overall outlook might look rosy, but skills fears cannot be ignored. The fight for talent is going to heat up and could cause wages and inflation to rise. How businesses respond will be key to keeping growth plans on track.”
Skilled worker shortage will hamper growth
The IBR data finds that globally, +36% of businesses expect to hire more staff over the next 12 months – another record figure. However, compared to 2016, fears that a skilled worker shortage will hamper growth have increased by 2 percentage points in Asia Pacific, 2pp in North America and 5pp in the EU so far in 2017.
Despite this, and even with increased profitability expectations at record highs, only one in five (20%) business globally plan to increase wages above inflation over the next 12 months – down 1pp on Q1 2017. One notable exception is Germany, where plans to award above inflation pay rises have leapt from 35% to 43%.
Francesca Lagerberg adds: “Employment is increasing, profits are increasing, concerns about skilled workers are increasing, yet plans to increase pay in real terms remain stagnant. Something will eventually have to give and could cause greater inflation. In Germany, businesses appear to have realised that with tight labour markets, increasing pay is necessary to retain and recruit the skilled staff needed.
“Addressing skills shortages is a difficult balancing act. But it is increasingly growing as a long-term issue businesses must address. The message to businesses from these findings is to plan and prepare for spending more to ensure the skills needed to drive future growth. Increasing wages is a short-term measure but longer-term, businesses will need to look at training programmes to boost skills among existing workers, and even working more closely with education institutions to ensure the right skills are being taught at an early age.
“There is also evidence that businesses are conscious of the role of robots and automation in filling skills gaps. Our research shows that investment in machinery and R&D has increased in recent quarters. However, these are long-term steps which will take time to deliver.
“If the business community takes this issue seriously now, the storm clouds may clear and the strong levels of confidence we see today may well be sustained.”
Notes to editors
The Grant Thornton International Business Report (IBR), launched in 1992 initially in nine European countries, now provides insight into the views and expectations of more than 10,000 businesses per year across 36 economies. More information: www.grantthornton.global
Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis, primarily by telephone. IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with more than 2,500 chief executive officers, managing directors, chairmen or other senior executives from all industry sectors conducted in January and February 2017.
 Net balance % i.e. total optimistic less total pessimistic