Rising to the UK’s Skills Challenges

The Industrial Strategy Council’s first paper on skills, UK Skills Mismatch in 2030, set out the challenge of equipping UK workers with the right skills and highlighted a pressing need to shift to a new norm of lifelong learning. By 2030, around 7 million additional workers could be under-skilled for their job, representing about 20 per cent of the current workforce. With 80 per cent of the projected 2030 workforce already working today, workplace skills, particularly management, critical thinking, and digital skills, are likely to experience severe shortages if action is not taken now.

The Council believes government, employers, and individuals all have a role to play in upskilling and reskilling the UK workforce. Developing an effective skills system is a key element of a successful Industrial Strategy and delivering the objective of ‘good jobs and greater earnings power for all.’ It is also central to ensuring that the UK is competitive in the industries of the future.

Since the 2017 Industrial Strategy White Paper, government has introduced reforms to the skills system and announced new funding which go some way to addressing the challenges ahead – including the recent Skills Toolkit. However, the Council believes they are likely to be insufficient in scale and, in some cases, need refining.

This paper calls for a clear overarching vision for UK skills and a long-term commitment to delivering it in partnership with employees, employers, training providers and employer organisations. Improving UK management practices and enabling individuals to assume ongoing responsibility for developing their own skills will need to be key elements of that overarching vision. Policy stability and continuity emerges as important for employers to navigate the skills system and build relationships within it. Interviews conducted for the Council call for evolution of existing policy, not revolution. Improved use of information and data analysis will be required to better meet sectoral and local needs while contributing to the wider objective of raising productivity and competitiveness.

This paper explores four themes that could play a role in reducing future skills mismatches and incentivise lifelong learning. Detailed interviews with employers and case studies of international skills systems have been undertaken and are used in conjunction with existing published evidence. While there is no single solution, the research indicates that the following are some ways in which the UK could reduce future skills mismatches through upskilling and reskilling its workforce.

Firstly, increasing employer investment and employee participation in training. Employer investment in training in the UK is low relative to many international competitors. Reasons for low investment include uncertainty over securing a return, poor access to suitable training, and a lack of flexibility in provision. While there are examples of low skills and low productivity firms in all sectors and areas, a prevalence of such firms in some local areas and sectors contributes to a lack of demand for training. This could have negative consequences for regional equality and social mobility, as those with the lowest skills are participating in training the least.

Secondly, managers and leaders can play a crucial role in championing and monitoring learning. Clear goals and improved systems can more effectively facilitate skills development and skills utilisation within organisations, as can clear internal career progression paths and awareness of training benefits. Better data on training outcomes and improved management practices can inform better training decisions.

Thirdly, effective strategic and/or local partnerships. Partnerships between employers, training providers and employer organisations can better align programmes and policies to local economic development needs and national objectives. They offer potential for improved access to the skills employers are seeking, at the right level and in the right places. Access to reliable local labour market and skills data can help sectoral and local partnerships understand and address specific skills challenges in a co-ordinated, analytical, and collaborative way.

Finally, creating a positive lifelong learning culture is necessary if individuals are to respond to rapidly changing skills requirements and the UK is to remain competitive. The need to maintain and update digital literacy, coupled with increased automation and longer working lives, all increase the importance of lifelong learning. Changes in the structure of employment and in working lives place increased onus on individuals to develop and adapt their skills. Appropriate information and incentives, coupled with managers and leaders who offer on-the-job coaching and mentoring, will support continuous learning.

The international skills systems profiled differ from the UK in several aspects. They experienced less flux in their skills system, stronger employment protection legislation in most cases, and a greater role for employer representative and employee representative organisations (i.e. social partners) than exists in the UK. Key strengths relate to flexibility of provision, the degree of employer and social partner engagement with training, a strong evaluation culture and the value placed on Vocational Education and Training (VET) within society. The report provides examples of flexible funding and delivery which could drive up employer investment and employee participation in lifelong learning. Progress has been made in reforming apprenticeships which are an important part of the solution, as are shorter, cheaper options for upskilling and retraining. Digital developments offer opportunities to develop innovative, cost-effective approaches to training and provide greater flexibility.