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The importance of skills and the threat of a skills shortage

September 2019Helen

Why are skills important?

It doesn’t matter how good your product or service is, it’s your people that invent and adopt the new technologies and materials to make them even better, your people that build relationships with customers and your people that ultimately drive the competitiveness and profitability of your business.

When the people with the skills and experience your business needs aren’t available in the numbers you need, the repercussions can be serious and include:

  • Reduced agility
  • Declining productivity
  • Additional recruitment expenses
  • Increasing workloads across existing teams
  • Increasing expense and reduced control associated with outsourcing to a specialist provider
  • Having to decline work or projects

Apply a skills shortage to a whole sector and the impact can be wide-ranging. ‘Failing to address the skills gap in the highways sector will hold the industry back and put at risk the essential infrastructure the UK needs.’ Christina Brown, HR Director at Balfour Beatty Highways, Investments, Plant & Fleet Services & Homes³

Earlier this year the Association of the British Pharmaceutical Industry (ABPI) warned the UK is falling behind Europe and the rest of the world in terms of numbers of students studying many STEM subjects vital for discovering the advanced treatments and technologies of the future.⁴ The result of not addressing the skills shortages could negatively impact the UK’s status as a world-leading R&D hub and the movement of highly skilled jobs abroad. Bad news for the UK economy in general and NHS patients in particular.

Why is there a shortage?

The lack of talent coming through in the UK’s manufacturing and technologies sector is a particular concern; at the moment, approximately 186,000 new engineers and manufacturers are needed every year until 2024, but we’re currently facing a deficit of 20,000 graduates annually⁶

The advance of technology means the skills employers need now are very different to even just 10 years ago.

Brexit: the impending end of free movement of labour is already being felt in specific sectors, like construction, and is expected to worsen when Britain actually leaves.

Full Employment: Britain’s economy is the closest it has been to full employment since the early 1970s. With the jobless rate at 4%, companies are finding it harder to hire the right workers.

Historic: The reality is that the skills shortage existed prior to the referendum in 2016.

Ageing workforce: An ageing workforce is causing problems in specific sectors – such as in construction.

Failure to attract young people: in their 2019 Annual Manufacturing Report, Hennik Research found that 57% of UK manufacturers believe the education system is disastrous for the industry and needs a total overhaul.⁶

Where are we now?

According to a new report commissioned by The Open University¹, the majority of organisations in the UK (91%) had struggled to find workers with the right skills over the 12 months prior to the study.

It estimates that the talent shortfall is costing a £6.33 billion a year in recruitment fees, inflated salaries, temporary staff and training for workers recruited with a lower level of skills than were needed for the post.

But it’s not just the additional expense involved in finding the right people, it’s the length of time the process takes and the impact that has on a business – for example preventing it from being as responsive and agile as it would like to be.

Having the right people in place is especially important to navigate through periods of change so given the current, changeable geopolitical and economic landscape, it is a real concern for business leaders.

Worryingly more than half of those surveyed by the OU expect the situation to deteriorate over the next 12 months

What can employers do?

Clearly the government and educational instructions will be instrumental in addressing the skills gap but employers can do their part too.

  • Build don’t bolt-on: focus on work-based training for example via the Apprenticeship Levy. By taking a longer-term more sustainable approach, you’ll be better placed to meet your business’s strategic needs because your workforce will be more agile, loyal, motivated and productive.
  • Education: need to generate interest among young people before they make decisions about further and higher education. Apprenticeships. Work with careers advisers to ensure young people are given advice in accordance with the demands of the modern workplace.
  • Reach out to people who have left the industry. In June 2017 Highways England launched its ‘first returners’ programme aimed at attracting people who had taken a career break of two or more years back into the workplace.²
  • Investing in new technologies and techniques – as well as keeping companies efficient and competitive, investment in new technologies keeps staff motivated and ahead of the game.
  • Automation has its place: in certain sectors automation will be key in reducing headcount requirements but it tends to mop up lower-skilled, repetitive work (at least initially) and doesn’t help in areas where specialist – dare we say human – skills are needed.    
  • Change out-dated perceptions: either of certain industries (for example the perception a lot of people have, including young students, of manufacturing is that it isn’t a stimulating, creative or rewarding profession), certain roles (the idea that working with your hands is somehow not as important as working with your mind) or of your particular organisation – which is especially important when trying to recruit a local workforce . See our article on building your Employer brand (below)
  • Promoting equality in the workplace:  A 2018 Tech Nation report revealed that only 19% of the current digital tech workforce is female. So an easy way to attract more talent is to attract more women. McKinsey’s Power of Parity report estimates that $1trillion can be added to global GDP by 2025 by advancing women’s equality. Repeated studies have also demonstrated that having women account for at least 30% of leadership positions adds 6% to a company’s net profit margin.⁵
  • Good effective marketing: Ensuring you have a robust marketing strategy that highlights the benefits of working at a company helps to generate enquiries even when you are not directly recruiting. Putting effort into your online and social media presence is vitally important particularly in the locality where you are recruiting. Never underestimate the power of your reputation. A strong reputation in your industry will go a long way in attracting existing talent and with the next generation, but that requires effort.

¹ The Open University Business Barometer 2018

² Transport Infrastructure Skills Strategy, Two years on. A report by the Strategic Transport Apprenticeship Taskforce July 2018

³ www.scapegroup.co.uk/news/2018/do-we-have-the-skills-to-keep-britain-moving

www.openaccessgovernment.org/skills-shortages-uk-science/57837/

www.insider.co.uk/special-reports/it-skills-shortage-britain-brexit-13759783

www.aircraftinteriorsinternational.com/industry-opinion/uk-manufacturing-has-a-skills-shortage-and-its-not-just-due-to-brexit.html

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