Combination of factors means UK faces severe workforce crisis by 2025

New projections published in Mercer’s Workforce Monitor predict that a perfect storm of falling net migration driven by Brexit and an ageing population, will lead to a severe shortage in the UK labour market. If these challenges are not met with immediate action by UK employers, they will face significant costs trying to attract workers with the leadership and skills they need to execute their business strategies. Mercer anticipates the UK workforce will increase by just 820,000, or 2.4 percent, by 2025, a significant reduction in recent trends that have seen 9 percent workforce growth in the 10 years to 2015. For the first time in half a century, the overall population will be increasing at a faster rate than the workforce, creating long term structural challenges for the economy.

In its report, Mercer models an additional demand for labour in the health and social care sector of 710,000 workers based on the needs of an anticipated further 2 million over 65s in the UK by 2025. Assuming this demand is met through forecast of workforce growth, only 110,000 additional workers will be available to drive the growth of all other industries seeking to grow. In the ten years to 2015 there was a similar expansion in the number of people working in the health and social care sector; however, other sectors were able to grow with an additional 2 million workers available.

Mercer also expects there to be a significant shift in age demographics across the workforce. Projections suggest that over the next eight years there will be 300,000 fewer workers under the age of 30 and 1 million more over 50 in the UK as a result of falling net migration and ageing baby-boomers. This is likely to have a particular impact on London, whose economy is heavily dependent on young and migrant labour. Mercer forecasts that London’s resident under 30s worker population will fall by 25%, whilst over 50s will increase by 25%.

In its report Mercer holds factors that will impact future workforce supply, such as technology changes and gender participation, either constant or at trend to allow a more detailed focus on the underlying supply-side dynamics. This then emphasises and helps inform the talent strategy aspects that organisations can proactively control in order to address the impending recruitment and retention challenges. To help businesses Mercer has set out Five Lines of Defence:

1. Buy, build and retain – develop a compelling employee value proposition to strengthen traditional sourcing methods, focus on retention
2. Diversify the talent pool – bring deeper insight to new and different sourcing methods to attract inactive workers and new types of employees
3. Improve productivity through automation – where there’s a business case for it, automation can help relieve workforce gaps
4. Move and relocate work – consider moving roles to parts of the country where more workers can be found
5. Regroup – consider whether the realities of the potentially shrinking workforce can support your growth ambitions