How London’s looming tech talent shortage could cripple our country

We need 300,000 more digital workers by 2020. Can we protect against this dire shortfall?

It’s a Thursday night in Old Street, in a walled-off yard with a lurid red and yellow helter-skelter at its apex. A couple of hundred tech types of all shapes and sizes are swarming in and around stalls serving up face painting, free booze, fruity fro-yo and falafel. It’s a party, and it’s buzzing with the work-hard-play-harder type bees that make the London tech scene so special.

It’s easy to float away on the quite intoxicating cloud of creativity, kookiness and commercial success of London’s tech scene. It feels like exciting things are happening in the capital – and indeed they are.

But the trouble is that all the activity and adventure is fogging over a brewing thunder storm.

We are short on IT and tech skills – potentially desperately short.The UK digital industry will need 300,000 new recruits by 2020 to reach its full potential, according to a recent report from the UK Commission for Employment and Skills (UKCES) and e-skills, the sector skills council for business and IT.

We currently have 1.1 million IT specialists in the UK, but only half are employed in the digital sector, according to the same study. And the demand for tech talent is only going to grow as our working and personal lives become increasingly centred around technology. IT employment rose by an average 5.5% a year between 2009 and 2012.

Around 17% of the 29,000 IT jobs in the UK are “hard to fill” vacancies due to skills shortages, according to the e-skills/UKCES report. Even Facebook has said it struggles to find the right tech talent in this country.

The CBI’s Education and Skills Survey from June 2013 found that two in five companies are struggling to recruit the workers they need with advanced STEM (science, technology, engineering and maths) subjects. Some 41% of businesses questioned said they believe skills shortages in these areas will last another three years.

The economic impact

Why should we care? For a start, the UK digital industry currently contributes £69bn to the economy.

“Technology is central to the economy,” says Karen Price, CEO of e-skills UK. “This is nowhere more true than in London, with IT specialists powering every sector, from defence to retail and from finance to manufacturing.”

London is particularly feeling the pain of tech skills shortages because 23% of IT business in the UK are based here, according to the e-skills/UKCES study. Almost half (45%) of Tech City’s businesses say the biggest challenge they face is a shortage of skilled workers, according to a survey from GfK conducted in May.

Clearly, when businesses are unable to access the talent they need, they are less likely to be able to grow as rapidly as they want or plan to. And that, on a cumulative scale, threatens our whole economy.

A tech talent shortage also threatens innovation. Almost seven in 10 businesses in the e-kills/UKCES study said that hard-to-fill IT vacancies caused “a delay in developing new products or services”. Half said it meant losing business or orders to competitors.

Lee Chant is UK & Ireland IT and Telecoms managing director at Hays, the leading recruiting experts, and has 25 years’ worth of experience in IT recruitment. He explains that a lack of talent with the necessary IT skills in the permanent marketplace is meaning companies “have to fill gaps with contractors”.

That work isn’t necessarily being picked up by UK companies, though. “Now we’re starting to see the contract marketplace and the IT marketplace become more buoyant, we’ll see more overseas contractors come in on contract or interim,” Chant says. “We’ll see services outsourced to the new tech hubs like Poland and Russia.”

That means money flowing out of the UK. And British businesses won’t be saving money, either, by outsourcing overseas. Chant says that overseas’ contractors in the likes of India or Poland will typically have a cheaper daily rate, but the costs soon stack up to mean there is rarely much if any price difference between using UK or overseas workers.

He says costs of using overseas workers include “the management wrap, the time you spend explaining and going over there and bringing people over here, and once the piece of work is complete then bringing it back in and connecting to the existing IT system – and that requires testing and project management”.

Tech specialisms in demand

It’s little surprise, then, to learn that IT project management is among the more sought-after specialisms in the UK. Chant says there’s market hunger for talent within niche higher-level project management and consultancy and change management, such as people who can understand “how a big firm that’s got 10,000 PCs becomes a much more agile organisation that operates in the cloud”.

Chant says other skills and specialisms in hot demand include business intelligence, big data, cloud, virtualisation, development skills, “cutting code, analysts, programmers, developers, also skills in the mobile apps development space”.

The e-skills/UKCES study cites specific roles that companies are particularly struggling to fill. It says “skill shortage vacancies occur predominantly in skilled areas such as professional (business analysts, architects and system designers, programmers and software developers, project managers, web design/development) and associate professional (operations technicians and user support) occupations.”

Future-proofing your organisation

The good news is that companies are not completely stranded. Yes, they may find it difficult to fill these roles. But they can also act strategically now to future-proof themselves against future calamity – and, in doing so, help buoy up our chances of a tech-propelled economic resurgence.

In short: there is hope.

“Employers are keenly aware that growth today is dependent on better access to technology skills,” explains e-skills’ Price. “That’s why we’re all committed to creating a world-class pipeline of IT specialists in London and across the country, via high quality apprenticeships and new industry-backed degrees.”

Lesley Cowley OBE is the CEO of Nominet, the company which provides .co.uk web domains, among others. She says: “Businesses need to work together, and we believe that apprenticeships are an important way to ensure the talent pool for the whole sector remains fresh and growing.”

Nominet has developed an apprenticeship scheme, now in its third year. “This offers a path for young people into IT careers, with several of our apprentices having moved on to full-time roles within the business,” Cowley says.

“We are, however, only one part of this industry and the scale of the skills shortage means many more UK businesses, particularly small and medium enterprises, need to consider offering their own schemes as a gateway for young people keen to develop their skills.”

Hays’ Chant points out that the IT landscape is changing fast, with new roles constantly emerging. “We’re starting to see some really interesting different job categories starting to appear,” he says.

“Previously, where you had CIO [chief information officer] and CTO [chief technology officer], we’re now seeing chief data officer; business intelligence directors; digital marketing officer – which previously would have been sales and marketing director; chief experience officer
– who handles all-round customer experience inside technology.”

The constantly-evolving array of disciplines can seem overwhelming. But it needn’t be if your recruitment strategy accepts the need for adaptability.

“There are still core things you can do to future-proof [your organisation],” says Chant. “Get really strong project people who specialise in change and who see how the shape of an organisation will change.

“But you cannot afford to sit still. You have to think: are we going to do anything, and how are we going to do it?”

Right now, the London tech scene is electric with the possibilities of what the future may hold. But those businesses that will last beyond the serving of the last smoked hot dog and free Mojito, or the latest iStore fad, or the newest must-visit interactive website, are ultimately those that can see the future with most clarity.

Businesses can make sure they are ready for our bold new digital future with action early on and a strategic attitude to skilling up the workforce. And if enough of them are on top of that, our economic prospects might not look so stormy after all.

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