CBI Director-General speech on the future of work

WELCOME

Good morning, everyone and welcome.

I want to thank our strategic partners, BAE systems, Phoenix Group and Mercer – all of whom are true leaders in our work on people and skills. I’d also like to thank our corporate partners, Mills & Reeve, ISS, the University of Birmingham, and Manpowergroup Talent Solutions.

With their support and expertise, we’ve created what we hope will be a challenging, insightful and – most of all – valuable day for you.

THE FUTURE OF WORK

Now, I remember debating during Covid whether anything would ever be the same. Many people thought everything would change. I was on the other side of the argument. I suspected nothing would. But I was wrong. Work has really changed.

Not just because of Covid. But because of several tectonic plates that − combined with the eruption of the pandemic − have left us with a genuinely new landscape.

And a truly stark conclusion: we in Britain don’t have the workforce and the skills we need to prosper and grow.

Why?

Our demographics have changed. The population is ageing. And a generation in their 50s and 60s – with private pensions and property wealth – can take early retirement.

We are suffering from a mental health epidemic. It is keeping many at home, and impacts many more still in work.

More broadly, the pandemic has changed perspectives on the balance of work in our lives and the way we lead them. This means many may work still, but not like before.

Meanwhile, in this country, political views on immigration have hardened. With politicians afraid to explain its benefits even in a world of massive labour shortages.

Technology has evolved so fast, that 90% of today’s workforce need to retrain by 2030. Yet our skills system is still operating in an analogue world – in so many ways.

All this combined has conspired to challenge traditional models of work; to leave our labour market way out of balance; and to push companies into very different ways of working.

Today’s CEOs – and I speak to dozens of them every week – are dedicating a huge share of their time and energy to people, and these very thorny questions.

I have been thinking about this very hard for two years. Our CBI teams have been debating it with members, with each other, and with me.

Crystalising in my mind are some very new principles that all of us will have to adopt for the future of work. I’d like to talk about them this morning.

Not because they are set – they are not. But I believe we can see enough now to know that these new realities demand a new approach. And if we as business leaders don’t start leading the change, we will end up chasing it. And I know that’s how many of us feel already.

NEW PRINCIPLES OF THE LABOUR MARKET

In a moment I want to set out what the new principles of winning in the talent market look like. But context is everything.

So here – for debate – are five new principles of the UK labour market – the far broader landscape that I think is all our new reality post pandemic.

First – Flexible Working is becoming Mainstream Practice – flex has always had deep merits. But given today’s shortages, and without immigration, it’s vital to growing supply because it’s likely the only way to get those who’ve left to return. It’s hard to see how those now economically inactive will become full-time active overnight.

Second – Wellness is becoming an Employer’s Job – this is what employees want and need. It’s what those who are at home and could be back, want and need. The country needs it too – to have business lead on preventing illness because the NHS just doesn’t have the bandwidth. There is nothing to fear here because we in business are good at this.

Third – Automation is our Friend. We need more robotics and AI to help us deploy the people we have more effectively, as well as take the place of people we can’t hire. Any firm not reviewing now how to do this will find themselves chasing in vain to catch up. The politics of automation have changed too. Politicians and academics now champion it as a replacement for immigration. They seem to ignore the reality that it’s likely to replace as many if not more skilled jobs than lower-skilled ones. They seem to believe the UK can miraculously achieve an economy with only higher-paid, higher-skilled jobs. They are wrong about that. But not that automation and AI are now a must-do. They are.

Fourth – Skills Policy and Immigration Policy must finally be brought together – governments of all flavours have serially failed to have the most elementary approach to our labour market. Asking what skills does the country need? Identifying what skills do we have available? Then using immigration in the short run for the remainder, while amending skills provision for the long run. Simple right? Not in Britain I’m afraid.

And as the Government contemplates labour inactivity – fighting an uphill battle against early retirement or long-term health problems, they must turn to the parents who would be in work or increasing their hours but for unaffordable childcare and conclude the Fifth principle – The UK Needs a Childcare Revolution. We simply can no longer trail other countries in enabling parents to work.

These five principles won’t surprise HR experts in the room. But what’s changed is that they are no longer growing trends, or long-term predictions for the future – they are imperatives for the present.

I make these assertions not born of speculation. But from talking to hundreds of businesses, everywhere in our country, for whom this is the number one challenge.

And by confronting the numbers. The labour market is so very tight – with unemployment low and vacancies across the economy still well above their pre-pandemic levels, after reaching the record-high of 1.3 million last year.

Since 2020, there are half a million more people net who are not working or looking for work, in the UK.

And this isn’t getting better. According to the Bank of England, UK labour supply will barely be growing at all by the middle of this decade.

Therefore, one of our biggest challenges is ensuring more of the 1.7 million people who are economically inactive but do want to work – can.

On flexible working, according to research from Timewise, nine out of 10 people want it. But only three out of 10 job adverts offer it. The stats around part-time work are even starker – where the volume of people wanting to work part-time is outpacing available part-time jobs 4:1.

And take childcare. Where a British family – with two parents earning – spends around 19% of its net household income on childcare, compared to around 1% in Germany, 5% in Spain and 9% in France. Public funding for childcare in the UK also comprises less than 0.1% of GDP – the second lowest investment in the OECD.

In England, the cost of a part-time nursery place for a child under two grew by 60% in cash terms between 2010 and 2021 – twice as fast as average earnings.

Over a million women cannot take on more hours because of the cost and unavailability of childcare. This equates to around £28.2 billion in economic output lost every year.

Or take workforce health. Over a quarter of those who are now economically inactive are out of the workforce because of long-term sickness. That’s the biggest share – hovering around its highest point for 20 years.

The cost of poor health to the UK economy is upwards of £180bn GDP, with around 131m working days still lost to ill-health annually. And it’s estimated employer-led health interventions, to prevent common physical and mental health risks, could help save £60 billion every year – reducing the impact of ill-health on the UK workforce by up to 20%.

This is really hard stuff. But it’s vital to confront. The sooner we adopt new principles for a very new labour market reality − the sooner we will reduce inflationary pressure; increase growth; increase skills; increase productivity and in turn increase prosperity.

NEW PRINCIPLES OF THE TALENT MARKET

Not that anyone of us in business believes we can wait for that to happen. If there’s one subject that keeps CEOs awake at night these days, it’s how to win in the new war for talent.

The old ‘war for talent’ was about quantity and quality. The original book of the same name in 2001 talked about demand outstripping supply because of demographics; and a real premium for high-performing talent, with plenty of soft skills alongside the technical ones.

Today’s war for talent is about numbers too – we’ve already discussed the shortages crisis. But more than ever, it is a competition about values. The values a company holds. And the values of work it promotes.

Much of this is driven by the different generations now in the workforce, and their expectations of how business should contribute to their own lives and wider society.

Younger workers especially are looking for value and purpose in their jobs. And they’re more than ready to challenge the organisations they work for – on that. Be it interrogating firms’ net zero credentials, commitment to equality, diversity and inclusion, or public advocacy.

But a lot of this is also about the values we hold as bosses towards employment – it’s no longer just they work for us – we have to work for them.

I think there are three new principles for winning in the talent market.

First − Your Business must be progressive. Without strong societal values, a central sense of purpose, a commitment to better employee lives, and active diversity and inclusion strategies, you will lose the talent war.

Progressive is not a political statement with a capital P. This isn’t about politics. It’s a reality check on the modern world, where people – especially young people – vote for employers – and across the political divide they share common expectations for a firm’s behaviour towards them and to the world around us.

This will rankle with the political class, I’m sure. But the political arena is no longer the primary arena of societal discourse. That has shifted to the everyday of social media and social organisation. That is, work.

Second − Work must become a Platform for a Better Life. Where we get a good job, with work that’s meaningful and rewarding. Where we get paid well, then trained or retrained for a better job and better pay. Where our physical and mental health are factored into our working lives and our employment relationship. Where our colleagues are our community who can support us. Where flexibility to our world outside work is not exceptional but default.

Then third – this better life we get to lead is one half of a New Deal for the Workplace. A truly mutual value exchange of what the employee gives and gets that goes way beyond terms and conditions. The return for bosses from this better proposition is this: loyalty, discretionary effort, leadership. If we want these – not merely employees who clock in − we have to earn them.

So, this is the deal. Codified in Employee Value Propositions. The Get and the Give. And vitally, a deal validated in both higher retention and better company performance.

ACTION FOR THE FUTURE OF WORK

These are our new realities. Of our labour market. Of our talent market.

So, what should we do next?

Well, on labour shortages, we need to first empower the people who want to work to do so. And the Government can help us get started at the Budget in two weeks’ time.

On childcare, we need real public investment to make it affordable for parents, who want to work. So, we’re asking Government to boost funding for the existing childcare provision for three- and four-year olds, while also expanding it to cover one- and two-year-olds.

On employee health, the Chancellor can extend the Expenses and Benefits system to employer health interventions for the most common workforce health risks. That’s mental health, as well as back, joint and muscle injuries. And Government can also deliver on its pledge to make occupational health support easier for SMEs.

But alongside that we must upskill our existing workforce – so they can get higher-skill, higher-wage jobs. And that means migrating the Apprenticeship Levy into a new Skills Challenge Fund, where firms can spend their funds on accredited training, for the variety of skills they know their people need. And, given the labour shortage crisis we now face, the Government should allow firms to use unspent levy funds on getting the inactive back into work.

Then finally, we must admit what’s blatantly obvious: that all this will take much longer than we’d like. So, in the meantime, we need fixed, short-term immigration to bridge the gap. And we can get that by updating the Shortage Occupation List and granting visas for roles in obvious shortage areas – at all skill levels.

CONCLUSION

Firms can’t afford to stand still either. Whether you’re ready or not – the future of work is already here.

We must look again at the jobs we have. Consider how they need to change for a more flexible, hybrid future. And, crucially, identify what the people who do those jobs want and need from us as employers.

They want the work they do, to matter − making a difference to their own and other people’s lives. And if you can offer all this, you can expect the very best human capital in your companies and genuine competitive advantage.

Today is the beginning of a new story, called the Future of Work. I hope you enjoyed Chapter One. This one’s a page turner. Enjoy! Thank you.