As UK business begins to talk more assuredly of a recovery, the biggest thorn in the country’s side remains skills shortages. Even with unemployment at above 2m, there remain about 600,000 unfilled vacancies in the UK – the highest number for five years.
This affects businesses of every size and in every sector, from the likes of BAE Systems, the defence company, to small manufacturers and owner-run businesses.
FSG Tool & Die, a company that makes tools for the motor industry and for the plastics and packaging sector, is typical of the companies that find it difficult to recruit people with technical skills. Gareth Jenkins, managing director of the company, says that in Wales, where FSG is based, it is estimated that there is a shortfall of about 2000 people a year who could be hired if they were available.
“That skills gap is growing as people are retiring and companies are growing,” Jenkins says. It is not unusual, he says, for small businesses to run below their budgeted headcount, as FSG Tool & Die has for the last two years. Jenkins, who used to work for a major plc, adds: “There, an attrition rate of 10 to 15 per cent wouldn’t have bothered us. But in an SME, that is a killer: we can’t afford that, so we have to get recruitment right first time.” Jenkins is dealing with the daily implications of being unable to hire the right staff, despite being near areas with significant unemployment.
Recent studies from a variety of organisations underline the problem. Hays, the recruitment agency, said in September that there was an increasingly acute shortage of higher level skills available in the UK labour market. Only Spain, Portugal and Ireland in Europe suffer a greater talent mismatch.
The CBI has also reported that STEM - science, technology, engineering and mathematics - skills shortages are widespread, with 43 per cent of employers currently having difficulty recruiting staff. That rises to 52 per cent of employers expecting difficulty in the next three years. The business organisation surveyed 294 firms employing 1.24m workers and found that the most acute concerns were in key sectors such as manufacturing, construction and engineering.
The CBI fears a return to long-term growth might be held back by such shortages. If the UK is to rebalance its economy towards producing high-value products and service, much better technical skills are a pre-requisite, it claims. “We need to boost our skills-base urgently before the UK loses more ground. It’s time to stop looking on enviously at Germany and build a system that works,” says John Cridland, the CBI’s director-general.
The government-commissioned review by Professor John Perkins, the chief scientific adviser at the Department for Business, published at the end of 2013 also identified a “substantial demand for engineers”. It said migrants were filling a fifth of jobs in key industries because of a lack of skilled British graduates. Companies are forced to rely on foreign-born workers in many areas, as children continue to shun maths and science subjects at school. In all, migrants account for 20 per cent of workers in fields such as oil and gas extraction, aerospace manufacturing and computer, electronic and optical engineering.
The report warns that half of the 119 occupations featured on the government’s “shortage occupation list” – which gives firms special dispensation to employ overseas staff – require engineering skills. Another 20 per cent involve scientific and technical roles.
The Royal Academy of Engineering has also published a study saying Britain’s industry will need 100,000 new graduates in STEM subjects and a further 60,000 technicians and apprentices every year until 2020, merely to maintain current employment numbers. At present Britain produces only 12,000 engineering graduates a year. The UK also has the lowest number of female engineers in the whole of Europe.
British entrepreneur James Dyson is another businessman who wants government to spend less time talking up ‘silicon roundabout’ and the digital economy, and more effort training the next generation of engineers. He has announced plans to recruit 650 new engineers, 250 of whom will be found in the UK. Dyson, whose company saw annual profits rise by 19 per cent to £364m in 2012/13, has decided to increase his company’s spending on research and development by a quarter.
“We hear a lot about Silicon Roundabout but companies such as Facebook employ 4,000 people whereas Caterpillar [the tractor and digger manufacturer] has 150,000. Companies like mine, or Jaguar Land Rover, are booming. I am recruiting 650 highly trained engineers and scientists now but I could take on 2,000 if I could find them,” he says. Dyson says that half of his company's £1.2bn annual sales came from recently invented technologies, such as those employed in digital motors and cordless vacuum cleaners. The growth and success of the business was constrained only by a lack of skilled staff, he says.
In a sign of how desperate the situation is, Dyson is also prepared to pay the sort of salaries that graduates would find only in the City. The industrial designer will be paying its new postgraduate British recruits £33,000 a year plus a £3,000 golden handshake to work at the firm's head office and R&D base in Malmesbury, Wiltshire.
Meanwhile, Sir Dick Olver, chairman of the defence firm BAE Systems has also talked of the urgent need to change the perception of engineering after a survey showed that nearly four out of 10 UK teachers would not recommend it as a career choice to their students. “We must change that perception. Starting to achieve this will require a stronger and more committed partnership between industry and the education sector, both at universities and in schools,” he says.
BAE already has one of the biggest apprenticeship programmes in the country and takes a ‘schools roadshow’ to 250 schools in an attempt to reach and inspire 25,000 children each year. Similar stories can be found in the rail sector – where the National Skills Academy for Railway Engineering – says 200 critical rail projects over the next seven years, worth £25bn, are at risk because of skill shortages.
Sectors that do not require such strong science or maths backgrounds, such as the hospitality industry and or caring professions, also have shortages of skilled people.
One solution to the problem, put forward by some of the UK’s leading companies, is a pledge to recruit more apprentices and graduate trainees. These companies, which include Qinetiq, the defence-research company, engineering group Babcock International and EADS, the aviation giant, say they will recruit 5 per cent of their permanent workforce from this group for the next five years.
The campaign, backed by the CBI, has begun in engineering companies but there are hopes that retail and services companies will also make the commitment. If the 5 per cent target was achieved across the FTSE 350 group of leading companies it would equate to 180,000 jobs. Currently most big companies are recruiting less than 5 per cent of their workforce each year as graduate trainees and apprentices.
With unemployment among 16 to 24 year olds approaching one million, this is a welcome attempt to tackle both youth unemployment and skills shortages. It will not be easy, however, and many suspect the skills shortage can only be tackled by a wholesale shake-up of the education system, to produce a system that places equal value on vocational and academic training.
Angela Jameson regularly edits Sun City in the UK’s best-selling newspaper and also writes for The Guardian and The Times, where she was Industrial Correspondent and edited the Tempus share-tipping column. She read English at Oxford University.