Skills gap to cost the UK £120 billion by 2030, says report

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A report by the Learning and Work Institute (L&W) says that the UK skills deficit will cost the country £120 billion by 2030.

The report, published at the end of last year, showed that the country has too few highly skilled workers and too many low and intermediate skilled workers.

Overall, the analysis suggests there will be a shortfall of 2.5 million highly skilled people and an oversupply of 8.1 million people with intermediate or low skills. Of that number, 6.2 million will be low skilled, meaning below Level 2.

The new UK government has declared action on skills, promising more funding for FE/skills – a new National Skills Fund worth £3 billion throughout the next Parliament, a £500 million UK Shared Prosperity Fund to ‘replace’ the EU Structural Fund, and £2 billion for the FE college estate – and a greater emphasis on technical education.

But we have yet to see the fine print. The government have thus far been quiet on most policy issues, with an understandable focus on the upcoming trade negotiations post-Brexit.

An examination of the latest figures on apprenticeships, however, reveals that the skills gap shows no signs of resolving itself.

A Briefing Note by the Centre for Vocational Research, published this month, analysed Department for Education data on apprenticeships. The analysis showed that apprenticeship starts have fallen since the introduction of the Levy, from .5 million to .4 million today.

While there has been substantial growth in advanced and higher-level apprenticeships, with 20% at the higher-level in 2018/19 compared to 4% in 2014/15, intermediate level (Level 2) apprenticeships have fallen from 60% to 37% in the same period.

This is not necessarily bad news. If L&W are correct, the skills gap is a problem of high-level skills, so it makes sense to grow the offering there.

However, the purpose of apprenticeships is partly to provide an alternative route to social mobility and reskilling, so that a Level 2 apprenticeship could only be the start of an apprentice’s journey. As L&W also predict a large oversupply of particularly low skilled labour, the decline of Level 2 apprenticeships is concerning.

L&W say:

“The demand for skills could rise if measures to improve productivity and growth, such as the Industrial Strategy and other local and national policy, were successful…

“National and local policy, including the Industrial Strategy, could seek to meet these gaps by increasing the supply of skills. Employers and policymakers need to respond by improving our skills base and the utilisation of skills at work as part of a wider Industrial Strategy.”

Can and will the government deliver on its promises, and even if it does, are they enough? And what will companies do to cope with skills shortfalls in the interim?

Richard Alberg, CEO of MWS Technology, said:

“There are plenty of good ideas out there, both from think tanks and the government. But we are still no clearer on whether, and how, the UK can create a dynamic skills strategy. And there is a lot of policy energy going into how to manage immigration, further putting pressure on business access to skilled workers. Something has to give.

“MWS will continue to add value to the apprenticeship and skills sector through Aptem and our other EdTech innovations. But like many in the sector, we would welcome clarity as to the direction of travel. 2020 looks set to be a critical year for assessing where we will be in 2030.

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