Graduate labour market update: in-demand skills and Brexit impact

A look at in-demand skills areas and two reports analysing the impact of Brexit are on the agenda in this labour market update from Charlie Ball

The total number of online job adverts decreased by 1% on 24 March 2023 compared with the previous week and was 14% below the level seen in the equivalent period of 2022:

• 14 of the 28 categories increased, eight decreased and six remaining unchanged.
• Online job adverts increased slightly in six of 12 UK countries and English regions compared with the previous week, decreased in two, while four remained unchanged. The South East saw the largest fall, decreasing by 2%. Of the 12 UK countries and English regions, ten remained below the level of the same period in 2022.

The Recruitment & Employment Confederation's (REC) Labour Market Tracker remains buoyant:

• There were 205,947 new job postings in the week of 6 to 12 March 2023, that's 1.5% higher compared to the week before (27 February to 5 March), according to REC and Lightcast's latest Labour Market Tracker.
• There has been a 5% increase in the number of active postings in the week of 6 to 12 March compared to the previous week, with 1,447,095 active job adverts. The figure has remained stable around and above 1.4 million since January 2022, reflecting the high demand from employers.
• REC also note nearly 40,000 nursery, primary and secondary teaching job vacancies - a particular concern given publicised issues with the teaching applications pipeline.

REC also published their March 2023 Jobs Outlook this week:

• In December 2022 to February 2023, business confidence in the UK economy increased, rising by 13% to net: -51 from net: -64 in the previous rolling quarter, although overall this is still highly negative.
• Employers in February (net: -31) were significantly more optimistic than in January (net: -57) and December (net: -65).
• Employers' confidence in making hiring and investment decisions saw an even more substantial growth, increasing by 16% compared to the previous rolling quarter to net: -12 from net: -28.
• Employers' intentions to hire permanent staff in the short-term increased by 3% to net: +13. Regionally, employers were more optimistic in London (net: +22), followed by the Midlands (net: +17) and the North of England (net: +13).
• Forecast demand for both private and public sector employers also rose to net: +15 and net: +3 from net: +12 and net: 0.
• Medium-term hiring intentions for permanent staff rose by another 2% to net: +19. Similar to the short-term outlook, hiring intentions are higher in London (net: +28), which increased by 8% increase compared to the last rolling quarter, followed by the Midlands (net: +22) and the North of England (net: +18).
• Private sector employers were more optimistic about increasing headcount (net: +21) compared to public sector employers (net: +7).
• Employer intentions to hire temporary agency workers in the short-term rose to net: +12. Forecast demand for the private sector rose to net: +13 from net: +6, but demand in the public sector dropped to net: +7 from net: +28 in the last rolling quarter. Medium-term hiring intentions for temporary agency workers also saw an uptrend, increasing by another 2% to net: +12. Private sector employers' sentiment rose to net: +13 from net: +8, demand in the public sector dropped to net: +8 from net: +30 in the last rolling quarter.

Top in-demand skills areas

The Manpower Group's Talent Shortage survey finds that 77% of employers globally report difficulty filling posts. In the UK, its 80%. The top five in-demand skills areas are:

• IT and data
• Engineering
• Sales and marketing
• Operations and logistics
• Customer facing and front office.

Top five in-demand soft skills are:

• Reliability/self-discipline
• Creativity/originality
• Critical thinking/analysis
• Reasoning/problem solving
• Resilience/adaptability.

Most employers (57%) are offering more flexibility around work in order to attract and retain talent. 33% are increasing wages and the same proportion are looking at new talent pools, such as older workers.

Indeed finds the labour market cooling slightly but hiring still tricky. Indeed job postings signal a continued slowing in employers' hiring appetite into March, though as of 10 March 2023 still remained 26% above the 1 February 2020, pre-pandemic baseline.

Indeed also finds that relative interest in a range of jobs has fallen, particularly in cleaning and childcare. The categories which have seen the biggest increases in relative interest are software development, information design & documentation, mathematics, media & communications and legal. The remote-friendly nature of these occupations are likely one contributory factor, with searches for remote work on Indeed having risen strongly since the pandemic started to 2.7% of all UK searches in February 2023, a tenfold rise.

The impact of Brexit

There are two interesting academic papers examining impacts of Brexit on the labour market. The first, from Portes et al at King's College, looks at the impact of the post-Brexit migration system on the UK labour market.

Current patterns of work-related migration are very different from those under the old system, with some, mostly high-skilled, sectors seeing overall flows that are broadly consistent with pre-pandemic, pre-Brexit trends, others, mostly lower-skilled have seen very sharp falls. In other words, immigration for skilled (graduate) jobs seems to be at similar levels to pre-Brexit, but with more non-EU citizens replacing EU entrants. But lower-skilled roles have seen a sharp fall in immigration with little substitution by UK citizens, merely lower employment levels.

Meanwhile, this paper from Hall and Heneghan at Nottingham University examines the impact of Brexit on financial services employment in the UK - a largely graduate industry:

• Taking the UK as a whole, jobs growth in financial services is best characterised as relatively stagnant post-Brexit - this is better than many analyses predicted, but below long-term trend in contrast to buoyant growth in the EU (some which appears to be at the expense of the UK). Estimates suggest that if the rate of job creation had followed its pre-referendum trend, there would be between 85,000 and 105,000 more people working in financial services. Around 7,000 jobs appear to have been relocated from the UK as a consequence of Brexit.
• Employment has remained largely flat in Wales and Northern Ireland. England is the main driver of UK finance industry employment, reflecting the dominance of London in financial services as a whole. However, employment has declined more markedly in Scotland, from 108,000 jobs in financial services and insurance in September 2002 to 82,421 in September 2022.
• A number of financial centres have attracted business from the UK including Paris, Amsterdam and Frankfurt. Evidence also shows that different parts of financial services favour relocating in particular cities with market infrastructure relocations concentrated in Amsterdam, banking relocations concentrated in Frankfurt, asset management in Dublin and a wider range of relocations in Paris.
• Retail banking has seen declining branch numbers, reflecting the growing use of online banking services and a desire to reduce costs on the part of banks, with an impact on regional employment.
• Cost cutting within financial services firms has also led to some employment relocation away from regional cities in the UK, that were viewed as cheaper in terms of labour compared to London to cities in Eastern and Southern Europe, with Poland emerging as a particular beneficiary.
• There is also a likely effect of classification changes, as some roles which would be seen as financial services work may increasingly be categorised elsewhere. This is particularly true at the interface between financial services and computer services given the rise in fintech and tech companies entering financial services more generally. This is something to consider as we examine the UK's system of industrial classifications and may mean that some of the growth in tech employment in the UK is displaced financial services activity.

Written by

Charlie Ball

Head of labour market intelligence

Jisc