The 2016 graduate labour market in the UK

2015 turned out to be quite a positive year for the UK graduate labour market, so let’s take a look at what the new year might hold. As always, we will come back in 12 months to see how these predications fared.

And the first prediction carries on where we left off in 2015.

Getting used to skills shortages and recruitment difficulties

Recruitment difficulties and skills shortages were a feature of 2015 and they will be, if anything, even more central to the UK graduate labour market in 2016. We now have widespread graduate shortages across a range of key sectors, in engineering, in building and construction, in teaching, in health, in IT, in business services and in niches throughout the economy. Shortage of available graduates is affecting the ability of a minority of businesses and sectors to meet demand, and we should probably expect these difficulties to spread to other parts of the economy. 2016 will be about businesses learning to live with not always being able to find graduates when they need them and making plans to mitigate or avoid shortage. We’re not in 2011 any more.

Broadly positive employment outlook

Employment intentions are still up, but the rate of increase is slowing. Some employers, especially those in professional or IT services who had recruited strongly in the last year, may get more cautious on hiring as skills shortages make it harder to recruit, but overall we will likely see modest improvements in the graduate employment market and an increasingly benign jobs market for new graduates – although that doesn’t mean we can or should expect every new graduate to find work easily, or that those who don’t are failing.

But we do need to be careful. The outlook for manufacturing employment is not as positive, affected by weak export markets, by the continuing downturns in steel and in oil and gas, and by skills shortages. There are other factors at play that affect confidence as well….

An uncertain Euro referendum

I can’t bring myself to use the phrase ‘Brexit’, but 2016 looks likely to see a referendum on membership of the EU at some undeclared point, there will be a vicious media campaign, and leaving the EU is not considered likely to be positive for the economy in the short term. Business confidence is likely to be affected if it looks as if there is the prospect of a Brexit (now look what I’ve done), and a reduction in confidence means a weakening of the economy, and a weakening of employment intentions. A portion of the political skirmishing is likely to feature more rhetoric – and possible action – on curbs on immigration, which will exacerbate skills shortages.

Keep an eye on wages

Low inflation is keeping a lid on wage rises in many sectors, but skills shortages mean that some in-demand professions (especially in engineering, IT and professional services) are seeing much stronger wage pressures. The big question is about the salary expectations of the new cohort of graduates – the first to have paid the full £9,000 a year for the duration of their degrees. The repayment threshold of £21,000 means that many graduates in professional employment will start repaying from day 1 – will we see wages rises (as employers were predicting in 2011)? Will we see the rise of jobs paying £20,995 rather than £21,000? 2016 will be an interesting year for graduate wages.

The urbanisation of graduate work

Graduate employment is concentrated in cities, and that shows no sign of of changing soon. Over 40% of the working population in Newcastle, Manchester, York, Sheffield, Leeds, Bristol, Bath, Oxford, Cambridge, Cardiff, Swansea, Newport, Aberdeen, Dundee, Edinburgh and Glasgow had a degree or equivalent at the end of 2014, and when we get figures for 2015, Liverpool, Nottingham, Leicester, Birmingham, Coventry, Norwich, Ipswich and Southampton could all have joined the list. For graduates looking for work – look to the cities. Smaller urban areas, and rural areas, will have some roles, but mainly in a public sector which is likely to continue to lose jobs.

For policy – graduates will play an increasingly important role in urban economies, and we need to get to grips with a future where the largest group of employees in many of our cities – in some cases a majority, and not just in London – will have degrees.

There are undoubtedly more themes that will emerge in 2016 for the graduate labour market, and I’ll keep you posted if and as they do. Happy New Year everyone.

 

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