U.K.'s skills gap clouds hopes for stronger economy: Report

Skill shortages in Britain worsening, rank among most severe in Europe

LONDON (Reuters) — A worsening skills shortage could blight hopes that Britain can overcome years of dire productivity performance, potentially denting its economic expansion in future, a report suggested on Monday.

Weak productivity has been a big problem for advanced nations since the financial crisis and Britain has struggled more than most, potentially limiting how much workers can expect to earn in the future.

Skill shortages in Britain worsened for a fourth consecutive year, and now rank among the most severe in Europe, according to the annual Global Skills Index from recruitment group Hays and consultancy Oxford Economics.

This pushed up wage pressures as employers were forced into a "war for talent" in certain industries like engineering and technology.

While the unemployment rate has fallen to levels last seen before the financial crisis and wage growth has started to recover after years of stagnation, Hays warned the skills gap will create problems unless the government takes action soon.

"UK growth prospects are better than they have been in a long time but employers are facing ever-greater challenges around finding the talent they need," said Alistair Cox, chief executive of Hays, which operates in 33 countries.

"This can only mean that the productivity challenges we face as a nation will become even more severe."

Cox added that better training, attracting highly-skilled workers from overseas and better investment in technology are all part of the solution.

Underlining the challenge facing the government, half of Britain's companies have had trouble investing in staff and new technology that are needed to improve the country's weak productivity performance, according to the Chartered Institute for Personnel Development on Friday.

Britain's Conservative government in July unveiled a plan to boost productivity in July, and wants to train up 3 million apprentices by 2020 to fill the skills gap in areas like engineering.

But many business figures are critical of the government's immigration policy, which they say deters highly-skilled workers from outside the European Union, exacerbating the shortage of skills.

"Let's have some sensibly thought-through migration policies so that we are not closed to business for the very best people," Cox told Reuters.

"Our competition around the world — Singapore, Australia, Canada — are saying 'great, if you don't want these people, we welcome them'. And they've designed their visa systems accordingly."

A survey from the Recruitment and Employment Confederation earlier this month showed that job placements had been held up by a lack of skilled candidates.

The Hays survey showed other countries also struggle with a severe mismatch of talent, including Ireland and the United States.

Official figures on British productivity for the second quarter are due next Thursday, after it returned to modest growth in the first three months of the year. Output per hour is still around 1 percent lower than its level in early 2008, before Britain tipped into recession.

The Bank of England is keeping a close eye on wage growth as it mulls the first rate hike in over seven years. The ongoing productivity puzzle could cast doubt over the central bank's ability to gauge the speed with which pay will rise.

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