The labour market is tightening to its highest point in six years, with staff turnover expected to increase as more than eight in ten organisations (82 percent) anticipate trouble ahead in finding quality people to fill vacancies, according to latest findings from the Recruitment Confidence Index (RCI), produced by Cranfield School of Management.

Recruitment difficulties currently stand at their highest level since the RCI was started in December 1999. The areas of most difficulty have consistently been engineering and computing.

Dr Emma Parry, research fellow at Cranfield School of Management, says: “Employment levels have increased in the eight years we’ve been doing the RCI. Organisations have been recruiting more and more, but fewer high quality people have been coming into the workforce, resulting in rising recruitment difficulties for employers.”

As the talent war worsens, employers are responding by planning to spend more on recruitment in an effort to attract suitable candidates. Nearly four in ten (39 percent) respondents expect to increase their recruitment expenditure over the next six months. However, Dr Parry emphasises the need for employers to be more strategic about talent management rather than simply spend more on recruitment. She says: “Too often we see organisations just throwing more money at the problem rather than assessing which recruitment methods are effective.”

Indeed, a recent RCI report published by Cranfield School of Management in June found less than half of UK businesses (49%) implement talent development programmes. While 60 per cent of the businesses surveyed said talent management – the strategies and practices needed to define, identify, develop, attract and retain those deemed to have skills valuable to an organisation – is essential to a business’s bottom line, only 41 per cent of organisations strategically manage their star talent.

“Changing demographics mean the need for strategic management of human capital has never been greater,” says Dr Parry. “Organisations need to look at their employer brand and differentiate themselves from their competitors. They need to take a structured approach to development and retention, enabling them to “grow their own talent” and have an edge in the tight labour market.”

Key findings of this quarter’s RCI survey:

• Business confidence is at a near all-time high for the eight-year period tracked by the RCI, with a net percentage of +72 organisations reporting an optimistic response. This is also the highest level since December 1999.
• Expected staff turnover is at its highest level for five years, with a net percentage of +7 organisations anticipating an increase.
• Expected recruitment difficulties are at their highest point since December 1999, with more than 8 in 10 (82 percent) set to experience trouble filling vacancies.
• Most organisations (78 percent) expect pay increases over the next year to remain in line with inflation, as in previous quarters of the RCI.