North East economy struggles to grow amidst skills shortages

North East unemployment continues to be the highest in the UK at 5.5% and the economic inactivity rate – those not in work or seeking it – the second highest after Northern Ireland at 24.9%. UK average unemployment stands at 3.9% and the economic inactivity rate at 21.3%, according to figures released today by the Office for National Statistics.

The number of people in jobs in the North East in the period November 2021 – January 2022 was 1,189,000 , a rise of 7,000 over the previous quarter but a fall of 13,000 over the year. North East unemployment stands at 69,000, an increase of 2,700 over the quarter but a fall of 10,000 over the year. The claimant count stands at 81,900 in the North East. This is a fall of 1,800 over the month and a fall of 37,500 over the year.

Arlen Pettitt, knowledge development manager at the North East England Chamber of Commerce said:

‘Today’s figures paint the picture of a regional economy trying its best to grow in really difficult circumstances. There are some encouraging signs, including an increase in the number of people in employment and a fall in economic inactivity, but our unemployment rate remains stubbornly and significantly higher than the national average.

‘Our members are telling us of staff shortages in key industries, especially for roles requiring specialist skills like developers and motor industry technicians. These shortages limit growth and push up costs – just as individuals are struggling with the cost of living, so are businesses struggling with the cost of doing business as inflation hits energy prices and raw materials.

‘With the Chancellor’s Spring Statement a little over a week away, we need to see immediate action from him to ease these pressures, alongside efforts across government to turn levelling up into a reality.’

SKILLS SHORTAGES

Chamber member Steve Shaw of motor industry specialists Ingenia Recruitment of Washington, which covers the whole North East said: “The motor industry is experiencing a crippling skills shortage that’s costing tens of thousands per business. 

‘Local skills shortages are compounded by how difficult it is in the current migration system for dealers to bring in specialists like technicians, panel beaters and mechanics from overseas. We need to improve the local skills pipelines into these key regional sectors and adjust the migration system to keep up with the immediate shortages that are holding businesses back.’

Figures from the Institute of the Motor Industry show that in February 2022 there were 23,000 vacancies listed, the highest in 20 years. Steve Shaw added: ‘Our own findings show vacancies up 117% from 2020 – 2021, and Year to Date (1st January – 28th February 2022) vacancies are up 150%.

The North East Local Enterprise Partnership’s Chief Executive, Helen Golightly, said:

‘This month’s figures suggest we are seeing tentative signs of improvement compared with figures from the last quarter, with the number of people in employment increasing by over 7,000.

‘There have also been a number of people who have moved from being economically inactive, where they are not looking for work, to economically active, where they are making themselves available for work.

‘However, we should remain cautious and vigilant about these figures. Today’s statistics also shows that our labour market continues to face long term challenges with the highest unemployment rate, the highest percentage of people who have left the labour market and the lowest rate of people in work in England – whilst other regions are moving ahead as they recover from COVID-19.

‘Other data shows there is an opportunity to do more. Employers are reporting continuing demand in the labour market and difficulties in recruitment, and yesterday’s over 50s lifestyle study suggests that further encouragement for older workers who have left the labour market since the start of the pandemic could see them return.

‘There are now 18,000 more 50 to 64 year olds who are classified as economically inactive in the North East region compared to before COVID-19. Thirty-nine per cent of over 50s who have left the labour market nationally would consider returning to work, including 58% of 50-59 year olds, but they would need the right conditions and support to do so.

At a time when the costs on families from general inflation and energy price rises are increasing rapidly, we urge government to strongly and urgently focus on the needs of the North East to encourage more progress in the labour market.’