The UK labour market in 2024 is at a critical juncture. Despite the easing of economic pressures like interest rates falling, labour shortages across key industries persist. From logistics to manufacturing, many sectors are grappling with a talent deficit that’s affecting productivity and supply chains. For procurement professionals, the labour shortage presents both a challenge and an opportunity to step into a more strategic role—helping to mitigate risks, secure talent, and ensure business continuity.
In this blog, we’ll explore the root causes of the UK’s labour shortage, its impact on supply chains, and how procurement can take a proactive approach to safeguard operations.
The UK Labour Shortage: A Complex Issue
Labour shortages in the UK are not a new issue, but in 2024, they have reached a tipping point. Several factors have contributed to the current state:
1. Brexit Fallout: Since the UK left the EU, immigration policies have tightened, limiting access to workers from Europe. Many industries, particularly agriculture, construction, and hospitality, relied heavily on EU labour, and the shortage of available workers has hit these sectors hard.
2. Aging Workforce: The UK population is aging, with more people retiring or reducing their working hours. This has left a gap in skilled and experienced workers, particularly in sectors like manufacturing and logistics, where physical demands and technical expertise are needed.
3. Skills Mismatch: While some industries face shortages of skilled workers, others have an oversupply of talent with outdated or mismatched skills. The rapid pace of technological advancement has led to growing demand for new skills, particularly in automation, digital technologies, and green industries. However, there hasn’t been a corresponding increase in skilled workers to fill these roles.
4. Post-COVID Shifts in Employment: The COVID-19 pandemic reshaped the labour market in ways still being felt today. Some workers have moved out of certain industries entirely, while others have embraced flexible working arrangements, making it difficult for industries like hospitality and retail to fill roles that require in-person work.
The Impact of Labour Shortages on Supply Chains
Labour shortages directly affect procurement and supply chains in various ways, particularly in industries reliant on physical labour, transportation, and skilled technicians. Here’s a closer look at how these shortages are causing ripple effects across supply chains:
1. Delays in Production: In manufacturing, a lack of skilled workers can slow down production lines. Products take longer to move from design to delivery, and businesses find it harder to meet demand. This delay can lead to backlogs and missed revenue opportunities, putting additional strain on procurement teams to find alternative solutions.
2. Logistical Bottlenecks: The transportation and logistics sectors have been severely impacted by the labour shortage, particularly in the wake of Brexit. A lack of HGV drivers, warehouse workers, and port staff means goods aren’t moving as quickly as they should, leading to stock shortages and increased shipping costs.
3. Increased Costs: When businesses can’t access the workers they need, they often turn to overtime, agency workers, or higher wages to fill the gap. This drives up operational costs, which ultimately filter down the supply chain and affect procurement budgets. The need to source alternative suppliers or extend lead times can also increase procurement costs.
4. Lower Quality Control: Labour shortages can also lead to lower quality control in industries where skilled workers are essential to the production process. Without the right talent in place, businesses may struggle to maintain the high standards expected by customers, leading to reputational damage and returns.
How Procurement Can Address Labour Shortages
Procurement teams are increasingly being asked to take a more strategic role in addressing labour shortages and ensuring that supply chains remain resilient. While procurement’s primary role is traditionally focused on goods and services, the current labour crisis demands that procurement professionals expand their purview and play an active role in talent management and risk mitigation.
1. Collaborating with HR on Workforce Planning: Procurement teams should work closely with HR to forecast labour needs and develop long-term workforce strategies. This includes: - Analysing labour market trends: Procurement teams can help HR by analysing labour market data, identifying trends, and assessing how shortages might affect supply chains.- Developing workforce contingency plans: Work with HR to create contingency plans in case of labour shortages, such as building partnerships with temp agencies or developing upskilling programs for existing workers.- Coordinating recruitment and procurement efforts: Procurement professionals should align their supplier strategies with HR’s recruitment efforts, ensuring that key suppliers have access to the workers they need to meet demand.
2. Reevaluating Supplier Relationships: Labour shortages can directly impact the performance of suppliers. Procurement teams must proactively engage with suppliers to ensure that their labour needs are met, and that production schedules remain on track. Here’s how procurement can support suppliers: - Monitor supplier labour conditions: Regularly assess suppliers’ workforce capabilities and monitor for signs of labour shortages. Are they struggling to meet deadlines due to a lack of workers? Are they at risk of violating labour laws due to overworking employees?- Help suppliers with contingency planning: Work with suppliers to develop their own labour contingency plans. This could include cross-training workers, diversifying their workforce, or automating parts of their processes.- Diversify supplier base: Where possible, reduce reliance on any one supplier that is struggling with labour shortages by diversifying your supplier base. Having multiple options ensures that labour shortages at one supplier don’t halt your entire production line.
3. Leverage Automation and Technology: Automation and technology can help mitigate the impact of labour shortages by reducing the need for manual labour in certain tasks. Procurement teams can support the transition to automation by working with IT and operations departments to identify opportunities where technology can fill the gap. - Automate low-value procurement tasks: Look for opportunities to automate repetitive procurement tasks such as order management, invoicing, and inventory control. This frees up procurement teams to focus on more strategic activities.- Invest in supply chain technology: Tools such as real-time data analytics, AI-driven demand forecasting, and robotics in warehouses can help mitigate the impact of labour shortages by improving efficiency and reducing reliance on human workers.
4. Prioritising Ethical Labour Practices: While addressing labour shortages, it’s crucial that procurement professionals prioritise ethical labour practices. The temptation to cut corners or exploit vulnerable workers to address staffing issues must be avoided at all costs. Businesses should ensure that their suppliers adhere to fair labour standards and comply with UK laws regarding worker rights. Procurement professionals should: - Conduct regular audits: Ensure that suppliers are complying with fair labour standards, including appropriate wages, safe working conditions, and reasonable working hours.- Look for local sourcing opportunities: Sourcing locally, where labour standards are easier to verify, can help mitigate labour shortages while ensuring ethical practices.- Develop relationships with ethical staffing agencies: Partner with agencies that provide fair working conditions and wages to temporary or seasonal workers.
5. Investing in Long-Term Training and Upskilling: Labour shortages are not just a short-term challenge. To mitigate future risks, procurement teams can work with suppliers and HR to invest in long-term solutions, such as training and upskilling workers. - Supplier upskilling initiatives: Work with key suppliers to invest in upskilling programs that can help workers transition into higher-skilled roles. For example, if a supplier is struggling to find HGV drivers, could existing workers be trained to fill these roles?- Internal procurement training: Procurement teams themselves should invest in developing new skills to navigate the changing labour landscape. This includes understanding workforce dynamics, labour law, and risk management strategies.
Looking Ahead: A Strategic Approach to Labour Shortages
The labour shortage in the UK is a complex and evolving issue that’s affecting every aspect of business, from supply chain management to talent acquisition. For procurement teams, addressing labour shortages requires a multi-faceted approach that goes beyond traditional sourcing strategies. By collaborating with HR, reevaluating supplier relationships, leveraging technology, and prioritising ethical labour practices, procurement professionals can help mitigate the impact of the labour shortage and build a more resilient supply chain.
Investing in long-term solutions, such as upskilling and automation, will be key to ensuring that businesses can thrive despite the challenges posed by the current labour market. In 2024, procurement teams must embrace their role as strategic partners in navigating labour shortages and securing talent for the future.
The road ahead may be uncertain, but with the right strategies in place, procurement can play a vital role in driving business success and resilience in the face of the UK’s shifting labour landscape.
