Week on week, as the situation becomes more acute, we’re hearing more about so-called skills shortages in 43 key employment sectors right across the UK, particularly in science, technology engineering and maths (STEM). Business owners, politicians, recruiters and educators are well aware of the issue and yet it remains unresolved, despite the many initiatives underway trying to find a solution to it.

What is the skills shortage?

Simply put, at present there aren’t enough suitable applicants in the jobs market to fill the current number of vacancies. Somewhere in the region of 146,000 jobs will go unfilled in 2015 just because jobseekers haven’t got the skills required to fill these roles; around 60,000 of these in the IT and 40,000 in construction.

The current situation is rooted in the financial crisis of the Naughties and has slowly been getting worse, despite the UK’s emergence from recession and the current economic recovery. During the Global Financial Crisis of 2007-8 thousands of skilled workers found themselves jobless and chose to leave their skilled occupations in search of alternative employment. To put it into context it’s estimated around 400,000 skilled construction workers left the sector, only 100,000 having since returned.

Following the crisis employers had neither the means nor the money to recruit and train a new generation of skilled workers and this has resulted in the skills ‘gap’ or ‘shortage’ we are experiencing today.
 

Then

The last serious skills shortage was faced by the UK during the 1980s when, deep in recession, the country’s manufacturing and engineering industries fell into decline at the same time over one million school leavers (the highest number ever recorded at that point) hit the high street, unqualified and looking for work.

A period of rapid economic growth towards the end of the Eighties, particularly in the knowledge industries, addressed the immediate problem of unemployment but failed to train the next generation of skilled workers in other industries. Apprenticeship programmes were only offered by a handful of employers, such as Rolls Royce, and government initiatives, such as YTS and the Modern Apprenticeship, met with only limited success owing to their variable quality.

Poor prospects offered by roles in ‘manual’ employment and the UK’s shift from an industrial to a service economy meant that, by the late 1990s, skilled trades were commonly filled by immigrant workers.

When politicians and business leaders discussed how to tackle a future problem of a skills shortage, a figure of 75,000 apprentices a year by 2020 was mooted, but little was done to address it. Fast forward to 2007 and the cycle began all over again, this time exacerbated by more than thirty years of indecision.
 

Now

To understand the skills shortage today it helps to look at the challenges faced by businesses trying to grow on the back of this current period of economic buoyancy.

An annual survey of over three hundred businesses (and employing over 1.2 million people) conducted by CBI and Pearson Education and Skills revealed more than two-thirds of respondents expected to need more skilled staff for planned projects. Sadly, a similar survey conducted by the Institution of Engineering and Technology (IET) also confirmed the skills gap has worsened for the ninth year in a row, severely limiting the chances of UK businesses fulfilling future plans and aiding further economic recovery.

Steve Murphy, general secretary of the Union of Construction, Allied Trades and Technology (UCATT) blamed the situation on our historic failure to train apprentices. He said: “Skills shortages are a direct result of the industry failing to invest in the future. The entire mindset of the construction industry is focused on maximising short-term profits.”

Whilst concerns about the skills shortage are usually expressed alongside worrying sentiments about ‘damage to the UK economy’ it’s becoming clear that the long term consequences could be far more serious. Infrastructure, water, energy and our cities are could be heavily impacted by a continuing skills shortage; essential services the public and the economy heavily depend upon.

Billions of pounds worth of projects need to be delivered over the next few years in order to meet the needs of a growing, ageing population, not to mention the demands of our changing lifestyles. However, the schemes will never come to fruition if UK business cannot recruit staff with the right skills to deliver them. There is a growing concern that as the skills shortage worsens, budgets will not go as far as anticipated. As a result, we will get less of what we need, or end up paying more for it.

Although it has been discussed and agreed upon several times over the last thirty years it is now very clear that investment in training, apprenticeships and incentive programmes must be forthcoming. The outcome? A more joined-up approach from the government, training providers and employers should encourage young people to pursue skilled careers from an early age. In tandem with this industries must also examine how they can utilise innovative technologies more effectively to harness the skills of this generation.
 

Top ten UK industries with skills shortages, August 2015

  1. Skilled manual workers
  2. Administrative Assistants and PAs
  3. Engineers
  4. Sales Representatives
  5. Labourers
  6. Management / Executives
  7. Accounting and Finance Staff
  8. Chefs
  9. Machinists
  10. Supervisors

What's being done?

As stated above, the government is trying to encourage a move in the right direction. In this year’s budget, MPs confirmed a levy on large employers to fund new apprenticeships. However, many are concerned these steps are being taken too late in the day.

Katja Hall, deputy director-general for CBI the Confederation of British Industry (CBI) said: “The government has set out its stall to create a high-skilled economy, but firms are facing a skills emergency now, threatening to starve economic growth. Worryingly, it's those high-growth, high-value sectors with the most potential which are the ones under most pressure. That includes construction, manufacturing, science, engineering and technology.”

Rod Bristow, UK president of education firm Pearson, has suggested abolishing GCSEs and putting more emphasis on vocational skills at A-level would help to ease the skills shortage. He said: “Better skills are not only the lifeblood of the UK economy - as fundamental to British business as improving our infrastructure, technology and transport links - they are also critical to improving young people's life chances, of enabling them to be a success in life and work."
 

What does the skills shortage mean for the UK?

Project delays

The National Infrastructure Plan (NIP), the government document outlining the future requirements for the UK’s economic infrastructure, has identified a significant number of projects planned for the next ten years that could suffer as a result of the skills shortage.

Concerns are growing that projects that should work concurrently will instead be competing for the best talent from an ever decreasing circle of engineers who, naturally, will be drawn to only the most attractive projects. This worrying trend can be seen in the water industry where highly-skilled engineers are leaving in their droves for jobs in the energy sector, where salaries are higher and the projects more varied.
 

Higher costs

One of the major worries facing employers is the increased cost of attracting the best talent from a small pool of highly skilled candidates. Over 80% of employers surveyed by IET feared too few engineers in the UK would lead to significant wage increases - great for qualified engineers or engineering graduates but problematic for businesses still struggling to throw off the shadow of the 2007 Global Financial Crisis. Other sectors present a similar story and with people representing a significant proportion of a project’s expenditure increased employment costs are expected to impact all across sectors.
 

Global competition

A skills shortage could also pose a threat to our global competitiveness, decreasing the relative attractiveness of the UK as a destination for global business - a crucial factor in our continued economic recovery. The UK is the 9th most competitive country in the world, and yet in terms of quality of infrastructure, the UK ranks only 28th. However, it also means that more competition across the globe reduces the competition for talent within the UK, meaning that many UK graduates are being offered very attractive employment packages without needing to look overseas.
 

Reliance on skills from overseas

Conversely, if UK businesses cannot recruit sufficient skilled staff from the existing talent pool, the need to import skills from other countries, either by bringing staff to the UK or by using offshore resources will increase. For employers employing overseas staff can prove more cost-effective than paying a premium for skilled UK workers, particularly if wage inflation continues to push salaries up further.
 

Lost old skills, learnt new

However, we should acknowledge that the skills shortage presents some opportunities to re-evaluate how we do certain things. A limited set of resources has made us more savvy and forced us to become better at strategic planning - the National Infrsatructure Plan is a really good example of how big projects can still be tackled in the current climate. Careful planning could result in more than £6 billion of cost savings for the NIP, funds that could be ploughed into narrowing the skills gap in the construction industry.
 

What now?

In 2014 the skills shortage cost the UK economy £18 billion; a figure that’s set to rise year on year if something isn’t done soon. To have any chance of averting a major crisis for our economy the UK must double the number of apprentices and graduates coming out of colleges and universities. Additionally, and as a priority, industry and the government must formulate a workable strategy to begin training the next generation of skilled workers.

Considering what the British people have been through in recent years, recession followed by financial crisis and years of austerity, it’s unacceptable that almost 150,000 jobs can’t be filled because our workforce isn’t skilled enough.