Nigel Heap: How to tackle the skills shortages of tomorrow

Nigel Heap, managing director, Hays UK & Ireland on his masterplan to secure Britain’s future

We’ve asked more than 30 of London’s business leaders how they think Britain can create economic growth, opportunity and innovation. Read the full publication online: Securing Britain’s Future

Large parts of the world economy are subdued and many countries, including the UK, are suffering high levels of unemployment. Yet the employers we speak to regularly struggle to fill skilled jobs.

A shortage of skills could destroy our chances of recovery and growth. We are already seeing signs of wage inflation. Employers increasingly have to look overseas for the skills they need. They are then often mired in bureaucracy as they navigate local visa requirements.

How do we tackle the UK’s current skills gap? How do we tackle the potential skills gaps of the future? If we fast-forward 10 or 20 years, which businesses will be driving our economic growth and what talent will be needed?

Tackling the talent mismatch

First we have to understand the state of our labour market. We recently looked at issues around skills in the Hays Global Skills Index, produced in association with Oxford Economics. It looks at the availability and demand for skilled labour in 27 key economies around the world.

Although at first glance the UK comes out in the middle at 5.0, indicating a generally balanced picture for the labour market, the individual factors that make up the Index tell a different story. The UK had a high reading of 9.0 for “talent mismatch” – that’s the degree to which it is hard to fill vacancies despite the pool of unemployment. Your own experience and a glance at the newspaper headlines will probably support this.

Speaking to hundreds of employers across the UK, we have found that in particular businesses in the energy, oil and gas and engineering disciplines are short of candidates. It is also proving hard to find skilled IT professionals, project managers, and even compliance and risk management experts in our tougher regulatory regime.

Why? One contributing factor is that education isn’t targeted towards the areas where the business requirements are.

Not teaching workplace skills compounds the problem – there is a lack of “work-ready” candidates. We have long heard employers complaining that young people are leaving higher and further education with great academic qualifications, but not the basic workplace skills such as teamwork, communication and initiative.

Employers also face wage inflation in areas like IT and oil and gas, where there is a shortage of people with the skills to perform the jobs. Some employers are willing to pay more to find the right employees, but not all. We see businesses turning away good candidates because they simply can’t justify the salaries in such an uncertain economy.

All in all this paints a gloomy picture. So what can be done? We have three recommendations, based on the findings of our Index. Firstly, the government must better grasp the skills that are required today and in the coming decades. We must then attract people with those skills to the UK – which we are currently struggling to do. Many businesses fear that recent work permit and visa reforms have created a perception that the UK isn’t open for business. The number of work visas issued by the UK has fallen recently.

If we are going to have world-class industries, by definition we need world-class talent. The government urgently needs to address work permit and visa issues to ensure we are attracting that talent. To achieve that, we need fast-track visas for those with the skills demanded by industry.

The process for these visas must be internationally agreed. An international standard of 30 days for a work visa application would be hugely beneficial, and longer and more easily renewable visas for those with the correct skills should be introduced.

Secondly, employers should be offered fiscal incentives to increase training provision. The government has tested the water here – efforts to increase training provision have largely focused on apprenticeships. Apprenticeships have the potential to alleviate youth unemployment rates and skill shortages, if correctly managed.

But more could be done to address skills shortages in the industries that will shape our future, such as green energy and engineering, which currently face significant skills shortages. Tax incentives to provide training to an accredited standard would make the provision of training more attractive to employers.

Align education and industry

The third action is for the government to work with employers to draw up strategic plans to increase the provision of education in shortage skills. Businesses of all sizes and from all sectors are now able to apply for money to customise training programmes to suit their needs. This allows employers to recommend how courses can be closely aligned with their industry’s skill requirements. This is a great example of how the private and public sector can work together to help secure Britain’s future. If we fail to align education with industrial needs, we face severe skills shortages in years to come.

Many of the companies we speak to are taking matters into their own hands. They are looking for ways to be more creative in how they attract and retain employees. But it is clear that there is still a talent mismatch in the UK between unemployment and the ability to fill job vacancies.

Many sectors need to work hard to find short and long-term solutions to the skill shortages they face, and the government needs to work with them. The UK needs to make sure it has access to the right skills if it is going to be able to drive growth, create jobs and be competitive on the increasingly crowded world stage.

Read Securing Britain’s Future online now