After nearly four years of debate, division and diversion, the UK’s future outside the European Union is beginning to take shape and this week saw the government outline its proposals for new immigration arrangements. While the full implications will not be clear for some time, one industry expert has highlighted concerns about the existing labour market and how an indirect consequence of the new rules could be talent poaching.
According to the latest figures issued (in 2017) to the Migration Advisory Committee (MAC) by the Energy and Utility Skills Group (EUS) an estimated 9 per cent of the sector’s workforce is of a non-UK nationality, compared to 11 per cent across the UK.
Under the new system, migrants will be awarded points based on their salary, skills and their ability to speak English. A total of 70 points is required for applicants, although some characteristics are tradeable. For example, a candidate earning below the £25,600 minimum salary threshold may still be able to enter the UK if they have the relevant qualifications (a PhD in the case of a university researcher).
“We will no longer have the routes for cheap, low-skilled labour that obviously has dominated immigration and our labour market for far too long in this country,” said home secretary Priti Patel as she unveiled the new rules to take effect in January 2021.
The move has prompted concerns from some within the sector, especially in infrastructure. Alasdair Reisner, chief executive of the Civil Engineering Contractors Association (CECA), said his sector already relies on a large number of migrants and as such ending free movement potentially creates labour market pressures for contractors.
While there are perfectly legitimate questions being asked about how recruitment will be affected and how the sector will cope following the end of free movement, some would argue that bigger questions remain over the stability of the underlying employment market.
The latest figures from the Office for National Statistics (ONS), which cover the period October to December 2019, show a constrained labour market – a record high of 76.5 per cent estimated employment rate, with 33 million people aged 16 and over in employment. Furthermore, there were an estimated 1.29 million unemployed people. This is 73,000 fewer than a year earlier and 580,000 fewer than five years earlier.
“I look at the structure underneath this, before we even look at the immigration rules, have we done our own housekeeping to make sure the utility sector can fight its own corner?” says Nick Ellins, chief executive of EUS.
He adds: “What it (the ONS) basically says is we are at the absolute peak of restriction in the labour market – employment at the highest levels ever and unemployment at the lowest ever.
“When you look at the people who aren’t working, who could be available for work, there’s very limited numbers of young people, very limited numbers of females, and very limited numbers of the less-abled.
“The gist of it is of the people you’d go to for talent, you’d either go to the people who are not currently working, and it’s the most limited talent pool there has ever been, or you’d have to go to people who already employ that person and poach them. Those are the two options we face.”
Poaching is a real concern of Ellins and EUS and there is a fear that under the proposals the sector could come under more pressure to keep its workforce retained. Much of the debate in the past few days has centred on the adult social care system which, according to workforce intelligence specialists Skills for Care, employs more than 1.6 million people. Of these, around 250,000 are held by people with a non-British nationality. Ellins worries other sectors such as social care could begin looking inward to the UK jobs market which will affect non-engineering roles in the utility sector.
“Quite naturally the sort of people we would now use for utility services, particularly in customer service, regulation, legal, all those departments that aren’t necessarily engineering based, would be looked at. They (industries significantly impacted by the changes) have no choice but to come and find the people who are good at consumers, good at negotiation, good at overcoming objections, good at complaints and with emotional intelligence. They’ll have no choice but to focus on other sectors and we’d be one of those sectors. If that’s the way that the new rules work, utilities will come under even more pressure to see the staff it’s got retained.”
Similar concerns have emerged from the infrastructure sector. Reisner said: “With an economy that is close to full employment, it is unclear where industry will be able to recruit from for roles that do not fulfil these new criteria from the domestic market in the immediate future.
“In addition, many SMEs, which make up the vast majority of the UK’s construction industry, will now have to sponsor new entrants for the first time, working in an unfamiliar system.
“We believe further work needs to be done to ensure that industry is prepared for this new system, and to guarantee that employers in the infrastructure sector will be able to recruit new entrants at a sufficient rate to deliver the forthcoming ‘infrastructure revolution.’”
Ellins believes the real question following this week’s announcement is what next month’s Budget will bring. Only then will it become apparent what the full impact of the government’s post-Brexit policies will be. But what can we expect from fledgling chancellor Rishi Sunak’s inaugural Budget?
Infrastructure, believes EUS, is going to be the “golden egg” of the economy and it expects the government to roll out one of the biggest ever infrastructure programs. John Armitt, chair of the National Infrastructure Commission (NIC), recently called on ministers to take a “golden moment of opportunity” to make firm decisions on developing sustainable infrastructure beyond HS2 and accelerate existing planned projects as part of the government’s forthcoming National Infrastructure Strategy.
Of the £600 billion National Infrastructure Plan, which was last updated in 2015, the utility sector is the largest single contributor. Underlining its importance in a speech to the All-Party Parliamentary Group on Infrastructure, Armitt said: “At present, there is an insufficiently joined-up approach to infrastructure skills development in the UK, with a wide range of responsible bodies operating across different geographic and political boundaries. The human capital aspects of the National Infrastructure Plan for Skills need to be refreshed to help ensure our pipeline of future workers is adequate for the challenges ahead.”
Echoing Armitt’s words, Ellins said the plan, is “badly out of date” and is disconnected from the reality of the constricted labour market. Instead, he says, the budget has room to ensure the labour market is fit for the “number one golden child” in that it can divert unused funds from the apprenticeship levy to where skills gaps are.
For Ellins, it’s a case of ensuring the sector’s own house is in order before taking action. He laments the fact that government bodies such as the Department for Business, Energy and Industrial Strategy (BEIS) and the Department for Environment, Food and Rural Affairs (DEFRA) have not included provisions for human capital in their strategic policy statements.
“Not one sponsoring department in the UK or the utility sector, BEIS, DEFRA and their equivalent bodies, put anything about human capital and ensuring it in their strategic policy statements and if they did, they wouldn’t have to create policy. They just need to mention it, and everyone who works for that department would do it.
“Ofwat and Ofgem have already put workforce resilience as a requirement into the PR19 and RIIO2 processes so it’s a requirement of all business plans that they must be resilient for five years, plus 10. The unions have been pushing this point for a long time about sort of skilling up the workforce anyway, fighting back against other sectors to make sure the utility sector has the best chance of winning the talent that is available in the UK.”
There is also the question of salaries, with the general threshold for migrants being set at £25,600. Yet according to Ellins, the issue still lies with poaching. He says companies are more likely to have a problem finding a worker with enough industry knowledge to suit their needs and will therefore look to other UK companies to poach talent.
Immigration was a key issue in the debate about the UK’s future with the European Union and it is evident the government believes its new points-based immigration proposals reflects this. That said, it’s clear that before we can fully assess the impact the new rules will have on the utilities sector, next month’s all-important Budget will be crucial and will outline the scale of the country’s forthcoming infrastructure projects.