Skills crunch affecting ¾ of UK manufacturers

Published:  05 April, 2016

Productivity and the UK’s ability to be a power player in the digital industrial revolution are at risk because the Government has failed to get to grips with the skills crunch affecting manufacturers, warns a new report by EEF, the manufacturers’ organisation.

Over the next three years, industry bosses expect a significant increase in the demand for skills, but almost three quarters (72%) are worried about how this demand is going to be met.

Therefore manufacturers’ plans to drive productivity improvements and to capitalise on Industry 4.0 (the digital industrial revolution) could be derailed because the UK is struggling to provide the right quantity and quality of skills to meet the sector’s needs. And with demand for skills set to rocket, the situation is about to spiral further, the report warns.

Almost three quarters of manufacturers (73%) have found it difficult to recruit skilled workers in the last three years. They are challenged by both the quantity and quality of candidates, with firms regularly forced to contend with a lack of technical skills (67%), an insufficient number of applicants (64%) and a lack of relevant experience (61%). At the same time, Government (UKCES) statistics show that the number of ‘hard-to-fill’ vacancies in manufacturing remains stubbornly high at 35% - unchanged from 2013 and worse than in 2011 when it was at 30%. The situation is set to deteriorate even further as manufacturers expect a significant increase in their own demand for skilled workers over the next three years. Almost six in ten expect to need more people management (59%), leadership (59%) and production-related technical skills (59%) over the next three years alone.

Similar increases in demand for craft/technician (53%), sales and marketing (52%) and IT and software skills (47%) over the next three years show how manufacturers are looking to make strategic hires to drive forward their ambitious productivity and growth plans. However, this will place greater pressure on an already diminished skills pool, leaving almost three quarters of manufacturers (72%) concerned about accessing the skills their business will need in the next three years.

Firms are looking to overcome their skills challenges by offering a number of incentives to attract and retain highly-skilled employees. These include competitive salaries (84%), training (50%), opportunities to work in other areas of the business (49%) and flexible working (43%). Apprenticeships are also seen as a critically important way for firms to help close the skills divide over the longer-term. Almost eight in ten manufacturers (79%) plan to recruit manufacturing and engineering apprentices in the next 12 months.

According to the report, had manufacturers not been taking these actions they would already be over the cliff-edge and not just approaching it. Far from getting to grips with the issue, the Government has largely left manufacturers to try to soften the impact of the skills crunch on their own. At the same time recent policy changes, such as the National Living Wage, the apprenticeship levy and the proposed immigration skills charge, have added to the sector’s burden.

The report cautions that the challenges of finding, funding, retaining and retraining skilled workers are all likely to increase from 2016 onwards and that many employers’ proactive plans may be pared back as they feel the bite of the additional costs imposed through Government policy.

Tim Thomas, director of employment and skills policy at EEF, says: “Despite multiple warnings about the UK’s yawning skills gap, the dial hasn’t moved since 2012. Manufacturers continue to struggle to find the right people with the right skills – undoubtedly this has led to lost opportunities for employers, would-be employees and the UK economy.

“Had manufacturers not already been taking action we would arguably already be over the cliff-edge and not just approaching it. But this report contains a clear warning – we are just about treading water today and the struggle is only going to get harder. The demand for skills is going to soar in response to manufacturers’ productivity plans and their ambitions around Industry 4.0. Getting the right quantity and quality in place will be critical, which is why we are urging the Government to take firm action now.

“Government must match the ambitions of industry and ensure that the education and training system delivers the skills that employers require. Policies must help, not hinder firms. They should provide support, rather than hitting employers with additional costs that could potentially hold them back. Above all, an April 2017 start date for the apprenticeship levy is looking increasingly ambitious. A patched and piecemeal implementation will cause complexity and confusion for employers, apprentices and providers alike. Without a single, coherent levy platform ready well before April 2017, the levy launch risks sinking.”

The report makes a number of recommendations. In the short-term, it says the main priority is to scrap the proposed immigration skills charge and introduce grants to tackle under-representation in apprenticeships. Mid-term it says the Institute for Apprenticeships should identify gaps in provision and capital funding for Further Education and the roll-out of National Colleges should follow employer demand. Long-term, it recommends targets for secondary schools for the number of Key Stage 4 pupils going on to apprenticeships.