Skills shortages in the UK economy

This briefing note summarises the key findings based on the Edge Foundation report: ‘Skills Shortages in the UK Economy’ bulletin.

The report finds there are several key challenges, including a mismatch between the skills that young people are being taught and the skills that employers are looking for, a decline in investment in adult education and training, and a lack of diversity in many key sectors. However, many positive initiatives are underway, such as efforts to diversify the construction industry and pioneering training programmes in the renewable energy sector.

The report concludes that there is a need for coordinated action, robust investment, and imaginative solutions to address the UK’s skills shortages. It highlights the importance of the new Labour Government’s commitment to “kickstart economic growth” and “break down barriers to opportunity” and the role that Skills England will play in achieving this.

Skills Shortages in the UK Economy

The UK is currently facing a number of skills shortages, with businesses reporting difficulties in finding workers with the right skills.

• 62% of businesses report skills shortages.
• There are 872,000 young people aged 16-24 not in education, employment, or training (NEET), up from 798,000 in the previous year.
• 10% of businesses have at least one skills shortage vacancy.
• There has been a 9% drop in investment in training since 2011.

These shortages are having a negative impact on businesses, with 68% of employers reporting an increase in their employees’ workload. This is in turn leading to increased stress and pressure on staff.

There are several factors contributing to these skills shortages, including:

• A mismatch between the skills that young people are being taught and the skills that employers are looking for. Only 36% of young people in secondary school believe they understand the skills employers are looking for, and less than a third (34%) feel that their school supports them to develop the skills they need for their future.
• A decline in investment in adult education and training. Government spending on skills in England will be £1 billion lower by 2025 than it was in 2010, and the adult skills budget in England has been cut by 20% since 2010.
• A lack of diversity in many key sectors. For example, in the construction industry, employees from minority ethnic groups make up just 5.4% of the workforce and women only 11%.

Solutions

A number of initiatives are underway to address the UK’s skills shortages:

• The new Labour Government has committed to “kickstart economic growth” and “break down barriers to opportunity”. The government has established Skills England, a new body to unify the skills landscape and intensify training. Skills England will:
  • Oversee skills development in England.
  • Identify skills gaps and future demands.
  • Manage the accessibility of training opportunities through the new Growth and Skills Levy.
  • Collaborate with employers to develop, approve, and review occupational standards.
  • Oversee apprenticeship standards.
• The Edge Foundation has published a report called “Flex Without Compromise”, which sets out a number of options for the government to reform the Apprenticeship Levy. These options include increasing the flexibility of the levy for employers and improving its capacity to help deliver government priorities regarding young people and SMEs.
• The Association of Colleges has highlighted the importance of Skills England working in partnership with colleges to deliver on the government’s central missions through local skills planning and reform to the Apprenticeship Levy.
• There are a number of innovative interventions being developed by businesses and other organisations. Examples include:
  • Efforts to diversify the construction industry through early work experience opportunities, peer networking and support opportunities, and more upfront information about pay and progression.
  • Pioneering training programmes in the renewable energy sector, such as The Crown Estate’s pilot programme in East Anglia to upskill work coaches from the Department of Work and Pensions and educate them on the offshore wind sector.

Conclusion

Skills shortages are a major challenge facing the UK economy, but they also represent an opportunity to build a more inclusive and sustainable economy by:

• Investing in skills and training.
• Creating more opportunities for young people.
• Promoting diversity in the workforce.

The new Labour Government has committed to addressing this challenge and Skills England will play a key role in this. There are also a number of positive initiatives underway by businesses and other organisations. By working together, we can build a skills system that meets the needs of the 21st century.

In the context of health and social care policy, skills shortages are a particular concern. The sector is already facing a staffing crisis, and this is only likely to worsen as the population ages.

• The NFER report highlights that over one million jobs in ‘high-risk’ occupations, including administrative, secretarial, retail and hospitality roles, could be lost over the next decade. Workers with low or no qualifications are most likely to work in these occupations, and many of these workers will need to change careers in order to remain in the workforce.
• The Resolution Foundation report highlights the impact of mental health on employment outcomes. Young people with mental health problems are more likely to be out of work than their healthy peers, and they are also more likely to be in low-paid work. The report calls for better support services in further education colleges and improved advice and opportunities for young people when it comes to non-university pathways.

Addressing the skills shortages in the health and social care sector will require a comprehensive approach that includes:

• Increasing investment in education and training.
• Making the sector more attractive to young people.
• Providing better support for workers with mental health problems.
• Improving career progression opportunities.

The government’s commitment to “kickstart economic growth” and “break down barriers to opportunity” provides a good foundation for addressing these challenges. By working together, we can build a health and social care system that is fit for the future.

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