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UK faces talent exodus as economic outlook improves, Hay Group research reveals

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UK employers face a rising talent exodus as economic and labour market conditions improve, according to a study from global management consultancy, Hay Group.

The research, Preparing for take-off, which was conducted in association with the Centre for Economics and Business Research (CEBR), found employee turnover is set to accelerate in 2014, after subdued levels in recent years.

The number of workers 'taking flight' in the UK is expected to rise sharply in 2015 as confidence revives, reaching 4.3 million. This represents 765,000 more departures compared to 2012.

The research claims this trend is set to continue as turnover rates over the next five years are predicted to rise from 14.6% to 18%, and the number of departures in 2018 will stand at almost 4.7 million, representing over one million more departures compared to last year.

Chris Smith, consultant at Hay Group in the UK, said: "People have been reluctant to leave their current role due to the turbulent labour market associated with the economic downturn, government spending austerity and the Eurozone crisis which has held down turnover rates in many firms.

"But as conditions improve, dissatisfied workers pose a significant flight risk for organisations of all shapes and sizes in the UK. Recognising and then meeting the needs of the workforce will be key to retaining talent in the next few years."

The research also highlights significant talent shortages in the UK, with labour cited as a factor limiting production for 12% of businesses - one of the highest levels in Europe and well above the 4% observed in Germany.

The advanced manufacturing industry has particular difficulty securing skilled labour, with 18 per cent of businesses reporting shortages.

Smith added: "With retention a growing concern, organisations must guard against the significant costs associated with hiring and training new employees, as well as potential talent shortages, by focusing on retaining key staff.

"Robust succession planning processes and identifying and developing high potential talent from within the business is now essential.

"Organisations also need to understand which key factors, keep their employees engaged and respond accordingly whether that be compensation, career development, confidence in leadership or other drivers of commitment."

The study, Preparing for Take-Off, is based on a unique Hay Group macroeconomic model that analyses the main factors affecting employee turnover. The study covers 700 million employees in 19 countries worldwide.