Profitability of Welsh firms hit by skills and recruitment issues

New research from the Open University shows the knock-on impact on the growth of Welsh firms.

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Sion BarryMedia Wales Business Editor

12:50, 4 JUL 2022
Updated14:35, 4 JUL 2022

Welsh firms are having issues recruiting shows new research from the Open University. (Image: Getty)

Skills shortages and recruitment issues are impacting on the trading performance of a majority of Welsh firms, new research shows.

According to the Open University’s Business Barometer 2022 report, published in partnership with the British Chambers of Commerce, more than three-quarters (77%) of firms are seeing reduced output, profitability or growth as a result. The research also had public-sector employer respondents.

The Open University’s annual report, which provides a temperature check on the ��Ƶ skills landscape, also highlighted the effect the skills shortage is having on staff morale and wellbeing, as almost three-quarters (70%) of organisations say the impact increases workload on other staff.

To address the problem, around two-fifths (41%) of Welsh businesses surveyed will increase investment in staff training over the next year.

The knock-on effect of these shortages is also impacting company growth as 24% of businesses say they have had to turn down work or are not able to bid for work due to their staff shortage.

The report also revealed more than two-thirds (69%) of respondents in Wales are currently facing skills shortages, a big rise on last year’s report when 32% believed that finding staff with the right skillset was the single biggest challenge facing businesses.

Organisations across the ��Ƶ reported they were feeling the full impact of complex socio-economic issues such as Covid-19, Brexit, the war in Ukraine and rising business costs – all feeding into the skills shortage.

More than half (52%) of Welsh organisations have implemented some form of written plan around recruitment, training, addressing skills shortages, environmental, social and governance (ESG), or diversity and inclusion.

Yet only two-fifths (41%) say they will increase investment in staff training over the next year, suggesting financial pressures are taking over.

Moreover, less than a fifth (15%) of organisations in Wales say that on balance, the trend towards remote working has helped them to attract new staff, while 7% say that it has caused them to lose staff.

Viren Patel, director of the business development unit at The Open University, commented: “Our Business Barometer report highlights the need for employers to take a long-term strategic approach to addressing the skills gaps and that it’s more important than ever to take a proactive view on employees’ skills.

“The report also shows that recruitment is tougher than ever and that places a focus on growing talent from within and opening up opportunities for hidden talent both inside and outside the organisation.

“Critically, staff seem to be under more pressure than ever, looking at last year’s report, an increased amount of employers admit that the skills shortage is increasing their teams’ workload.

“Through The Open University’s work with employers, we’ve seen how education can make a huge difference to workforce impact and diversity. Education is a huge enabler and has a vital role to easing and solving the skills shortage. If we can harness the ambitions of our people who deliver products and services, then it’s a win-win for all.”

Paul Slevin, president and policy lead at Chambers Wales, said: “These results confirm the skills shortage challenges are worsening and Wales cannot afford this drag on our economy as we begin to recover from the pandemic and grapple with the impact of geo-political events.

“Forward planning for skills has never been more important. It is time for employers, training providers and policy-makers to work together to ensure the skills system delivers for individuals, businesses and the Welsh economy.”

Conservative Shadow Minister for Economy, Paul Davies MS, said: “It’s clear that skills shortages in Wales have got worse – not better.

“This is a result of Labour’s failure on the economy and their anti-business policies which are holding Wales back.

“Urgent investment is now needed in the skills sector to stem the increase in skills shortages and to ensure that businesses have the resources they need to recover and grow post-pandemic.”