• Just over half of firms (54%) have attempted to hire staff in the last three months (compared with 55% in Q2) 
• Most firms continue to face recruitment challenges, with 75% of employers reporting difficulties (73% in Q2) 
• Recruitment difficulties in the construction sector spiked in Q3, with 85% of firms reporting challenges (77% in Q2) 
• Less than a quarter (22%) of businesses increased the size of their workforce in Q3, compared with 23% in Q2 
• A similar proportion (25%) expect to increase the size of their workforce in the next three months 

The BCC Insight Unit’s latest Quarterly Recruitment Outlook (QRO) shows that difficulties in finding staff persist despite rising unemployment. 

Just over half of firms (54%) surveyed said they had attempted to recruit in the last three months. Of those firms trying to hire staff, 75% said they experienced difficulties, up slightly from the previous quarter (73%).

The research for Q3 was carried out between 18 August and 15 September, with more than 4,600 businesses across the UK (91% of whom are SMEs) responding. 

The hiring landscape continues to show wide variations across different sectors, with 85% of firms in construction reporting recruitment difficulties. Other services firms were the next highest at 78%, while transport, hospitality and professional services were all at 74%. 

Most firms did not increase the size of their workforce in Q3, with 61% saying staffing levels remained the same. Less than a quarter (22%) did increase their staff numbers, down slightly from 23% in Q2. Looking forward, most firms do not plan to hire extra staff, with 63% expecting their workforce to remain the same size. Meanwhile 12% expect to lose staff with 25% expecting to increase.  

Labour costs remain the biggest cost pressure for businesses, cited by 72% of respondents. But again, there are big sectoral variations with that pressure highest in hospitality (80%) and lowest in retail (66%).  

Faced with those rising costs, training investment remains relatively static, with 24% of firms saying they increased investment in Q3, compared with 23% in Q2. Most businesses (57%) didn’t spend any more on training in the last three months, while 19% reduced investment, similar to Q2. 

 What business say: 

“We are just about keeping our business going, but with the tax rises, we are not investing and definitely can't afford to hire new people or grow."  

Micro professional services firm in the West of England. 

"Employment law changes will slow employing people as it's risky to take a  

chance on new people."  

Medium manufacturing firm in East Midlands 

Jane Gratton, Deputy Director of Public Policy, at the British Chambers of Commerce said: 

“Employers are battling against sky-high employment costs and widespread skills shortages. The stark reality for firms trying to recruit is that it’s still far harder than it should be. Unless more is done to boost access to skills and contain employment costs, economic growth will remain stunted. 

“The skills crisis also has far-reaching implications for government policy. While Ministers have pledged to get the nation building again, with recruitment difficulties in construction spiking to 85%, delays to getting vital infrastructure in place are inevitable. 

“And with 72% of firms saying costs are putting pressure on them to raise prices, the spectre of higher inflation will continue to hover. 

“The situation is not improving, and there is a growing urgency to find solutions. The new technical excellence colleges will help increase the supply of some vital skills. But much more needs to be done and the coming budget presents a golden opportunity to unlock potential through targeted investment and incentives. 

“There is a huge talent pool in the UK that remains untapped. Almost a million young people are not working, training or in education, while three million people are missing from the workplace due to long-term sickness. 

“The government should use the tax system to help people stay in – or quickly return to - employment when they experience ill health. Tax breaks for health services that businesses provide to their workforce are an obvious solution, to protect people’s livelihoods and keep skills in the workforce. And for those struggling to get into work, we need a wage subsidy scheme, similar to Kickstart, to unlock employment opportunities for young people with long-term health conditions."