UK business owners embrace foreign workers as labour shortages rage on

52% of SMEs say they are in favour of opening the UK’s doors to welcome more workers from overseas, as mounting talent shortages threaten growth plans.

Small business lender iwoca, surveyed 500 business owners to get their opinions on attitudes to migrant working. Results indicate that the majority of business owners think hiring more from abroad would be good for the economy given the current hiring crisis.

Office for National Statistics (ONS) data paints a bleak picture when it comes to the UK labour market. Even microbusinesses (defined as companies with employees of 10 or fewer) have been hit hard by labour shortages, reporting 143,000 vacancies last month.

The results stand in stark contrast to the government’s ambitious ‘stop the boats’ strategy of curbing net migration. Last week, Whitehall’s Illegal Migration Bill, aimed at deterring refugees and economic migrants from entering the UK, was defeated by the House of Lords.

Skills shortages stall SME scale-up

Small businesses are becoming increasingly desperate to attract, and retain, new talent.  Official figures report a total of 459,000 vacancies in May 2023 – an increase of a quarter compared to the same period in 2019.

Digital skills, such as software development, are particularly in-demand. The adoption of new technologies is crucial for growth. But uncertainty around visa endorsement programmes, like the Global Talent scheme, appears to have led to a lack of job-ready tech workers.

No tech know-how is not the only blocker for companies. A shortage of soft skills amongst new recruits was identified as the main reason why today’s company owners are experiencing hiring regret.

This has been exacerbated by the post-COVID shift to online working, which has made working as a team more difficult for those interacting virtually.

In this context, iwoca’s findings are hardly surprising. Broadening the hunt for talent to a global scale would increase the number of qualified candidates for a role tenfold. Plus, with remote technology enabling businesses to communicate directly with potential employees, there’s no reason to limit hiring to local areas.

Commenting on the findings, Christoph Rieche, CEO and co-founder at iwoca, said: “SMEs up and down the country are facing huge pressures right now.

“Soaring vacancies, the inability to raise wages, mixed with staff shortages all mean one of the most important parts of the economy is battling against huge headwinds.”

The most common route for employers to sponsor a foreign worker is the ‘Skilled Worker visa’. In January, searches for Skilled Worker visas hit a record high in the UK as hiring managers reacted to the labour shortage.

Another option is the Scale-up Worker visa; a temporary licence specifically designed for those coming to work for a fast-growing UK startup. The charge for employers is around £364 for the first 12 months, plus £182 for each additional six months.

Business owners blame Brexit for staffing blow

According to iwoca, 48% of small business respondents blame Brexit for the sharp decline in available staff in the UK.

Between 2019 and 2022, the number of EU immigrants coming to the UK annually dropped by 54% to 151,000. These numbers have reached their lowest levels since before 2018 when EU migrants to the UK totalled 426,000 – nearly three times as much as 2022 levels.

Visa challenges for European migrants have introduced both time and cost burdens to the visa system. In particular, salary restrictions and curbs on student visa routes have made it difficult for young people to find work.

These deterrents have drastically restricted access to the continent’s international talent market, with both managers and workers put off by sponsorship fees, legal fees, and lengthy admin time to process applications.

The problem is also affecting British business travellers. UK nationals must now obtain a work permit if they are going to be doing productive work when visiting the EU (which could refer to any activity between attending a meeting and opening an international branch).

Non-EU immigration levels have softened the blow, with 130,000 extra workers compared to 2019 levels.

However, it seems business owners think reforms to the EU visa system would go furthest to alleviate the hiring pressure on UK small businesses.

Rieche adds: “SME owners believe that opening up the UK’s borders and expanding work visas are key for helping them to attract staff, and doing this will ease significant pressures on their businesses.”

Are you looking abroad to plug hiring gaps? Find out more about the legal process of hiring foreign workers in our employer’s guide to Right to Work checks.