This article analyses the regional imbalances between the labour market supply and business demand for workers in the UK with a view to finding solutions to improve economic productivity. According to the Office for National Statistics, the number of economically inactive people that want a job has grown to more than 1M people and the number of job vacancies has grown to more than 1M. It’s unclear why businesses are not filling their jobs. The government is providing financial support in the form of tax incentives and government funded skills development programmes.

What does the data tell us?

The importance in analysing the number of economically inactive people who want a job provides a measure of economic productivity in the labour market. It also uncovers the quality of job creation and the amount of ‘hidden’ unemployment within the economy. If the economically inactive population keeps growing as it has done, this can become problematic for economic productivity as socio-economic tensions begin to manifest themselves as political risks and economic instability. This ultimately leads to an erosion of wealth and economic independence.

The status-quo in the market

The headline statistics for the UK labour market hide an uncomfortable truth about the quality of job creation in the UK. The latest real GDP figures reveal it is 0.7% lower compared to 2019, real median incomes for full-time workers are lower compared to 2006, and GDP per capita growth has been trending lower since 2006. To put this performance into perspective, the UK is the only G7 economy with lower economic output compared to pre-COVID and pre-Brexit levels. This means we need an urgent solution to improve the quality of job creation, economic productivity, and inclusive wealth creation.

The business as usual tasks that need to change

Offshoring jobs and the use of creative accounting in the City of London has negatively impacted job creation, wealth creation and technological innovation in the UK. The evidence can be seen in the number of UK employees on zero-hour contracts which has grown by 388% in the last 22 years to 1.1M people and the value of computing, telecoms and IT jobs, which are offshored, has grown by 585%. When the government complains about the digital skills gap it must reduce the use of zero-hour employment contracts and reduce offshoring jobs.

New innovations delivering a positive impact

Increasing access to vocational skills and commercial innovation opportunities will make the UK an attractive place to do business. The data reveals that the highest population of economically inactive people who want a job are located in local authorities where there are world-class universities, including Birmingham, Glasgow, Sheffield, Bristol, and Manchester. We must reinvigorate our national capacity for innovation to deliver increased economic productivity and wealth to our nation by strengthening the connection between people, universities and businesses.

copyright Authentic Evidence Limited

The market leaders turning innovation into performance

When it comes to job creation within the UK, the largest creator of jobs is Tesco. They employ 326K people and pay them a median total compensation of £21K per year. When it comes to highest paying employers among the largest businesses, Man Group provides the best compensation with a median total compensation of £147K per year and 69% of its global workforce is based in the UK. Both companies are industry leaders that prioritise investments in homegrown talent that create value for the UK on an international scale, collectively generating £63B in revenues from £16B in assets.

How can we adopt best practice solutions

If the UK government wants to make the UK an attractive place to do business it must address the regional imbalances in supply and demand in the labour market. The digital skills gap can be solved by providing mutually beneficial incentives for people, universities and businesses to work together to increase our national capacity for innovation and economic productivity. We have a concentration of world-class universities in locations where we have the largest populations of people out of work and wanting a job. This can solve the problem of 1M vacant jobs and 1M wanting a job.