Tackling Britain’s dearth of skills and workers

Britain’s near record low unemployment belies a deep problem with its jobs market: the country has a major shortage of skills and workers. Employment remains below pre-pandemic levels, unlike in G7 peers. Vacancies are still over 300,000 higher than in early 2020. Early retirement, sickness and a change in immigration rules post-Brexit are all culprits. Meanwhile, the UK is an average performer on international education rankings, and its employers spend just half the EU average per worker on training. As this, and future, governments look to fix UK plc’s growth woes, addressing its staffing problem is a priority.

Access to the right talent helps economies grow, innovate and raise wages sustainably. Britain needs to develop a dynamic education and training system that raises skills and productivity with the evolving demands of the job market. It must also reduce workforce inactivity — which remains over 500,000 higher than before Covid-19 — and fix snags in its new immigration system. A multipronged approach is vital as Britain faces slowing population growth ahead.

Education is a starting point. The UK’s total education spending fell sharply in real terms over the 2010s. The government has started to increase school spending per pupil again. But there are still teacher shortages, and curriculums also need to be made more agile, with greater emphasis on digital, numeracy and financial literacy skills. Meanwhile, though UK universities compete well globally, vocational, technical and life-long learning options are lacking. Further and adult education budgets need boosting after years of squeeze. Proposals to develop higher-level technical skills qualifications and financial incentives for ongoing learning post-18 and after a degree are essential.

Improving on-the-job training and retraining opportunities will also be vital. England’s apprenticeship levy — a tax on businesses to fund apprenticeship training — needs reforming. It is failing to deliver training for the lower-skilled and young, but is also too rigid, with limited access to a range of courses. Better tax incentives for spending on training would help, particularly for green skills and suitable courses to address poor management skills, which limit British firms’ productivity.

Getting inactive workers back into work is important, as skills and confidence atrophy with time outside the workforce. Training for in-demand and sector-specific skills can support older workers. Childcare costs are also among the highest in the OECD: one estimate suggests poor access to affordable childcare prevented around 1.7mn women from taking on more working hours. Alleviating cost burdens like business rates could help more nurseries stay open. The health and wellbeing of those in work is key too. Small firms in particular would benefit from subsidies to provide occupational health services.

Britain’s post-Brexit immigration system has meanwhile delivered strong inflows of highly-skilled workers from around the world, but has left a number of shortages in less-skilled sectors. Targeted training and an expansion of short-term Youth Mobility visas to more countries could be one way to provide a stop-gap. Above all, lowering visa processing times and fees involved in hiring workers from abroad, particularly for SMEs, would help the new system become more effective. Loosening requirements under special visas for entrepreneurs and top graduates would also help attract the brightest talent.

These reforms are urgent: the Learning and Work Institute, a think-tank, forecasts skills shortages to cost the UK £120bn by 2030. Britain’s growth will continue to stutter if it lacks the people and the skills to deliver it.

This is the second in a series of editorials on measures to boost UK economic growth. The first, on business investment, can be found here.

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