Closing the skills gap: why Britain has a lot to learn

The UK's economic progress is being hampered by a shortage in high-level skills. The government, business, charities and academics must find new ways to work together.

by James Taylor
Last Updated: 09 Oct 2013

When MT saw the TV pictures of angry students trashing Whitehall in protest over tuition fees reform, our first instinct was not to hail the return of principled activism to a supposedly apathetic generation. Nor was it to condemn the riotous excesses of a feckless few who really don’t need to be spending three years studying Beckhamology at the University of Great Yarmouth. No: it was to wonder what all this means for the future of high-level skills in the UK.

OK, so we don’t get out much. But for UK plc, high-level skills – the technical, scientific, professional and other special abilities held by those trained to post-A-level standard – really matter. Research suggests that firms employing more high-skilled people are more productive and more innovative. So in an economy that’s becoming increasingly dominated by knowledge-based services, our companies need these skills if they are to compete and win. And since the success of the UK as a whole will depend on private-sector growth for the foreseeable future, that means a higher-skilled workforce is good for all of us.

Unfortunately, we’re already struggling to meet demand. Employer’s organisation EDI said last year that 45% of companies were finding it difficult to recruit staff with STEM (science, technology, engineering and maths) skills. And a recent poll of Institute of Directors members found that a lack of high-level skills has already caused higher costs, lost orders, less innovation and lower levels of staff engagement at UK plc.

So what happens if the proposed increase in tuition fees puts a massive dent in student numbers, as doom-mongers predict? Universities are, after all, the source of most of our high-skilled workers – including a large proportion of the UK’s managerial class. The UK Commission for Employment and Skills (CES) has estimated that of the 13.5 million jobs created in the next decade, about half will be leadership, management or technical roles. Where will all of these elite workers come from?

Britain should be in a strong position in this respect, because higher education is an area in which we’re supposed to excel: we have several world-class universities and we export education and training around the globe. Yet we seem to be going backwards. In 2000, the UK had the third-highest graduation rate in the OECD (behind New Zealand and Finland). But, according to the most recent figures, we’ve slipped down to 15th, with a rate of 35%, below the OECD average of 38%.

We’re also spending less on higher education – the equivalent of just 0.7% of GDP, which is again lower than the OECD average (1%). In other words, while the likes of Poland and Slovenia have been investing heavily in high-level skills, Britain has done the exact opposite. And that was before the recent cts.

The UK’s skills problem isn’t just about universities; it runs much deeper. The Leitch Review, commissioned by the previous Government and published in 2006, found that the UK ranked a lamentable 12th out of 18 comparative OECD countries when it came to skills. Tesco boss Sir Terry Leahy struck a chord with the business world in 2008 when he complained that standards were still ‘woefully low in too many schools’.CBI members continue to report that many school leavers lack basic literacy and numeracy skills.

‘When you look at the international comparisons, the UK is not as high as it should be – and it’s probably not moving fast enough in the right direction yet,’ admits Charlie Mayfield, who chairs the John Lewis Partnership and was recently appointed chair of CES. But if we’re serious about boosting high-level skills in particular – and given their correlation to enterprise and growth, that surely makes sense – universities seem an obvious place to focus our attention.

There’s clearly room for improvement, too: a CBI survey last year found that over 80% of firms felt that graduates lacked crucial employ-ability skills such as problem-solving, team-working and time manage-ment (areas that a university education is supposed to improve), while almost half were unhappy with their ‘business and customer awareness’. Even more alarmingly, one in 10 employers expressed concern about graduates’ literacy and numeracy. It doesn’t bode well for our chances of bridging that high-level skills gap, does it?

It’s true that some universities have made great strides on employ-ability in the past 10 years. The worry is, however, that when money is tight, this is the kind of extra-curricular activity that could bite the dust, to protect teaching budgets. That may please the purists who argue that university should be about learning for its own sake, rather than a means to a grubby corporate end. But it won’t do UK plc much good.

Fortunately for us glass-half-full types, there’s an alternative view. Carl Gilleard, chief executive of the Association of Graduate Recruiters, argues that these reforms will actually push employability up the agenda for universities. After all, if students are forking out £6,000-plus a year, they’ll expect a return on their investment – such as a job that will allow them to repay those big fat debts. It’s still early days, of course, but we’re seeing evidence of this already: UCAS applications for university entry in 2011 seem to show a big increase for vocational courses, such as medicine and education, and a drop-off in academic subjects, such as history and linguistics. This may explain why (according to a recent report in the Guardian) some universities are considering giving students extra marks for doing external work experience or demonstrating ‘corporate’ skills.

But this is just a start. Solving our high-level skills problem will require business and academia to work together much more effectively. Fortunately, excellent examples are to hand. These days, the most progressive graduate employers don’t just rely on having a bog-standard recruitment and development programme (or even an excellent one, like Unilever – see panel). They’re also building much closer ties with universities, by offering high-quality work experience placements, or by partnering on R&D, or by running skills courses.

It also makes sense to build closer links between academia and work-based training. McDonald’s is an interesting case in point: as well as putting 3,000 people through maths and English GCSEs, and another 3,000 through apprenticeships, the institution once mocked for the McJob now gives 50 managers each year a chance to work towards a foundation degree. It’s a McDonald’s course but accredited by Manchester Metropolitan University – so managers come out with a nationally recognised qualification. According to Jez Langhorn, VP for people at McDonald’s, the old distinction between vocational and academic courses just doesn’t apply any more. ‘I see it as a revolving door,’ he says. ‘It just depends what’s right at the time.’

This will be music to the Government’s ears, because giving primacy to vocational and technical courses is a huge part of its strategy for boosting high-level skills. The theory is that by getting more bright young people onto a vocational or technical track – which means reversing the perception that it’s inferior to the academic route – we’ll end up with more of these high-level skills in the workforce. ‘I want to attract the brightest and the best to these courses,’ the Coalition’s skills minister, John Hayes, tells MT. ‘By bringing in new people, we can drive up their quality and status, which will have a big economic and social effect.’

The other area where Government can help (since it won’t have much money to throw at the problem) is in talking to employers and making a long-term economic case for investing in skills. That’s particularly true for small firms, which have less time to think about this sort of thing.

And it’s a virtuous circle: if firms buy into the idea and imbue their staff with a ‘culture of self-improvement’, as Mayfield puts it, employees are more likely to work towards the high-level skills Britain so badly needs.

We’re not going to address our skills gap overnight, or by a single measure. ‘There are no quick fixes,’ says Mayfield. ‘We have to view this it as a long-term opportunity, with a series of issues to be tackled over time’. We’ve been losing ground to other countries for a decade. If Britain wants to have world-class leaders running world-class companies by 2020, we need to start taking skills seriously, fast.

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