The Institute of Directors (IoD) has raised concerns over the recent announcement by Home Secretary James Cleverly regarding changes to legal migration rules.

The package of measures is meant to cut net migration to the UK. The measures include an increase in the salary threshold for overseas workers from £26,200 to £38,000.

Alexandra Hall-Chen, Principal Policy Advisor for Sustainability, Skills, and Employment at the IoD, expressed worry over the potential impact on businesses already grappling with labour shortages.

Struggle Amid Labour Shortages

In response to the announcements, Hall-Chen highlighted the persistent struggle faced by businesses in recruiting necessary labour. A survey conducted by the IoD revealed that 39% of business leaders identified skills shortages as a significant negative factor affecting their organisations. Along with the condition of UK economy as a whole, it ranked second among the top concerns.

Additionally, challenges relating to the ‘cost of energy’ and ‘business taxes’ persistently trouble businesses. Notably, ‘Global economic conditions’ has emerged as a new top-five concern, displacing the ‘trading relationship with the EU’. This shift possibly mirrors apprehensions regarding recent developments in the Middle East.

“We know that skills and labour shortages continue to be one of the top pain points for businesses in the UK, with 39% of business leaders citing skills shortages as negatively affecting their organisation,” Hall-Chen said.

The IoD representative also pointed out the tightness in the UK labour market as a driver for inflation, emphasizing that these ongoing shortages contribute to sustained high interest rates.

“Without measures to increase domestic labour supply, policies designed to restrict businesses’ ability to hire overseas workers risk worsening inflation and holding down economic growth,” she concluded.