The UK economy is being held back by a chronic lack of relevant skills in the workforce. Addressing this problem is a growth opportunity if employers and policymakers are willing to take the right action now.
It is good news that policymakers recognise the UK has deep rooted economic issues which need addressing. In a speech last month, chancellor Jeremy Hunt MP said; “structural issues like poor productivity [and] skills gaps…. have led to uneven and lower growth.” He is absolutely right. Unfortunately, new research commissioned by AICPA & CIMA shows that the skills gaps holding back our productivity are getting significantly worse.
There has been a 17-percentage point increase in the number of SME employers identifying skills gaps in their organisation since 2020. Four out of every five of them now say there are skills gaps in their workforce despite almost 80% of them investing in additional skills training and professional development in 2022. That means there are businesses all over the country which cannot make the productivity improvements which would let them operate and grow to their full potential.
Despite this, people who are employed in SMEs are not prioritising upskilling. Our research found 62% do not see their lack of skills training and professional development as a barrier to progressing in their job or career. Given that just one in three SME employees undertook any skills training or professional development at all in 2022, is it really that surprising that we are not seeing significant productivity growth?
Another problem is that that even when people do decide to upskill, they do not know what they should learn to get ahead. For example, 25% of SME employers wanted workers with more numeracy and financial literacy skills, but only 5% of the SME workforce who said they were supportive of more in-work training thought these skills would be effective at increasing their productivity. There is no point trying to bridge the skills gap with the wrong skills, they need to be aligned with the needs of the modern workplace.
These problems are not insurmountable. If business leaders and policymakers work together, the skills gap could be closed. AICPA & CIMA have conducted extensive research on how this could be achieved.
Firstly, workers should be confident that if they want to upgrade their skills, their employers will consider their request fairly. This could be achieved by introducing a rebuttable right to retrain and mandated time for training.
A change which could make a real difference is reforming the Apprenticeship Levy to become an Apprenticeship and Skills Levy. This would widen the range of opportunities for developing the skills of the workforce and plugging the current skills gaps.
Additionally, we could learn from countries like Australia and South Africa, who created Productivity Commissions to drive improvements as part of a coordinated Productivity Strategy.
Our productivity report contains more recommendations for closing the skills gap. There are huge economic advances to be made if we achieve this, which would be of great benefit to both companies and workers. This problem has been left unaddressed for too long. The time has come to act.
