Businesses turn to automation amid hiring struggles

17 October 2023 4 min. read

Labour shortages continue to have a material impact on firms, 12% saying they shrank in the last year as they were unable to make the most of new demand from customers. A new study has found that the majority of firms are now trying to offset staff shortages by up-skilling pre-existing staff, while almost two thirds are investing in automation to reduce reliance on labour.

Since the Covid-19 pandemic took hold in 2020, millions of workers have left their jobs. The so-called Great Resignation represents a previously unprecedented event in the labour market, as following two years of home-working and public health measures amid the global pandemic, many people have re-evaluated what they expect from employers.

While the trend seems to have momentarily slowed, economists and business leaders continue to cite it as a factor which is stifling growth in the UK. According to a new study from the CBI and Pertemps Network Group, labour shortages are still having a material impact on firms’ ability to invest, respond to demand and grow. In the last year, 38% of firms told researchers from the business organisation that they were unable to grow to meet new demand due to staff shortages.

Businesses turn to automation amid hiring struggles

Conducted in August and September 2023, the Employment Trends Survey took opinions from 263 businesses of all sizes and sectors across the UK. The survey found that a further 22% had held back on investments to expand, due to unfilled roles, while 12% had actually seen their business shrink.

CBI Chief Executive Rain Newton-Smith said, “It is crystal clear that while labour shortages are making it more important than ever to focus on productivity, they are also making it harder to invest and grow, stifling the economic transformation needed to deliver sustainable growth. Businesses have been helping people get into work by increasing flexible working and making proactive investments in employee health, but they can do even more.”

Firms have adopted a number of key measures to try and adapt to the slow-hire environment. A 69% majority said they had resorted to up-skilling existing staff, while 65% had invested in leadership to help managers better engage and retain team members. And rounding out the top three, 60% had been investing in automation and technology which could help downsize their headcount. A narrowly smaller number had invested in improving base pay, suggesting that in spite of many reports trying to persuade staff AI would not replace their roles, employers are indeed looking to technology as a means to cut down on wages bills.

To some, however, this is a risky manoeuvre that could see firms miss out on key creativity that could help them navigate future market uncertainty. To that end, Matt Russell, CEO of employee benefits software provider Zest, warned that firms risk missing out or losing talent by not investing in their benefits packages in a challenging hiring market.  

“In a hugely challenging and competitive hiring market, businesses need to find cost-effective approaches to attract and retain key talent,” Russell explained. With more than four in ten employees claiming that a benefits package is the most important factor when considering a new role, investing in their benefits offering is a simple way businesses can stand out from the crowd boosting their competitiveness and supporting growth plans.”

With an election on the cards in the spring of 2024, many leaders were also keen to issue calls to prospective governments for support. As the UK prepares for a general election in 2024, a 40% portion of firms either do not know which party best serves their needs, or would back a third party – so the fact that many firms told the CBI they wanted incentives for certain kinds of business models might be a key way parties could win their support.

Tellingly, for all the bluster that they would turn to technology to shift their dependency away from human labour, 82% of businesses said that they would like government incentives to bring in that automation – suggesting they feel it will be hard to actually make such a change pay, without state support. Meanwhile 59% said that the government should make it easier for labour to migrate to the UK – calling for all skill levels to be permanently eligible for the UK’s Shortage Occupations List.

At the same time, 62% suggested they should receive more government support to make their workplaces an accessible place for disabled employees. And 54% said they should receive incentives to boost workplace health. Both measures suggest a new prioritisation of marginalised aspects of the UK’s labour pool – but apparently not in a way that would see employers willing to actually finance inclusive measures themselves.