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Bridging the skills gap to secure Britain’s industrial future

Published:  12 May, 2025

Britain’s manufacturing sector is facing an acute skills crisis that threatens its economic stability and global competitiveness. Despite being the world’s sixth-largest economy, the UK lags behind in adopting advanced manufacturing technologies, ranking 24th in global robot density. A lack of skilled workers is a significant barrier to progress, and the decline in apprenticeship numbers has only worsened the situation. Addressing this problem requires a strategic, long-term commitment from both government and industry to ensure that the workforce has the necessary expertise to apply emerging technologies effectively.

For the past five months, Make UK’s Industrial Strategy and Skills Commission has worked with employers, educators, and policymakers to devise a plan to overhaul the vocational training landscape. The Commission has called for a ‘Skills Covenant’—a formal agreement between industry and government to increase investment in training and upskilling. This would be a crucial step in ensuring that Britain can close the skills gap, attract investment, and strengthen its industrial base. By prioritising practical applications of new technologies, businesses can ensure that workers are equipped with the skills needed to implement automation, artificial intelligence, and other emerging innovations effectively.

Funding is at the heart of this issue. The Commission has identified significant sums of money that could be redirected towards skills training. It points to £800 million from unspent employer contributions to the Growth and Skills Levy—currently reallocated by the Treasury elsewhere—and £650 million raised annually from the Immigration Skills Charge. If these funds were ringfenced, they could finance the training of 40,000 new engineers, a move that would go a long way towards tackling the estimated shortfall of 55,000 engineers that is costing the UK economy £6 billion each year. This investment would ensure that workers are not just trained in theory but are able to apply their skills in real-world industrial settings.

The Skills Covenant

The Skills Covenant would not only ensure greater financial investment in training but also introduce measures to strengthen the link between industry and education. The proposal includes a workforce exchange allowing manufacturers to second employees to educational institutions to help train the next generation. In addition, an electronic work skills passport would enable employees to track their qualifications throughout their careers, improving the transferability of skills across sectors and ensuring that acquired expertise can be practically applied in different industrial contexts.

A major obstacle to progress is the declining number of educational providers offering technical courses. Many institutions have abandoned these courses due to high costs, leaving a gap in training provision. The Commission has urged the government to adjust funding bands to reflect the real cost of delivering high-value courses, particularly in engineering. The funding allocated for Level 3 engineering and technician apprenticeships, for example, currently stands at £27,000 but should be raised to £35,000 to meet actual costs. There is also a call for training providers to be allowed to use levy funds for capital investment in equipment and machinery, making it easier to set up engineering and manufacturing courses. Access to modern, industry-standard equipment is crucial to ensuring that trainees can immediately apply their learning in practical settings.

The need for upskilling extends beyond new entrants to the workforce. Many manufacturers plan to increase spending on retraining their employees in the coming years, recognising that investment in workforce development is essential for growth. To encourage businesses to invest in training, the Commission has recommended tax rebates for companies that invest in accredited skills training in key sectors. This would provide a tangible incentive for businesses to prioritise skills development, ensuring that employees remain adaptable in a fast-changing technological landscape and are equipped to apply their skills to new processes and innovations.

Beyond funding and industry commitments, there is a broader issue of perception. Careers in manufacturing and engineering are often overlooked by young people, partly due to inadequate careers guidance in schools and colleges. The Commission has called for a fundamental shift in how technical education is promoted, including the expansion of the University Technical College (UTC) model. Providing clearer pathways into manufacturing careers would help build a more robust talent pipeline, ensuring that young people see vocational training as a viable and attractive alternative to traditional academic routes, with direct applications in high-tech industries.

Robert Halfon, Co-Chair of Make UK’s Industrial Strategy Skills Commission, has emphasised the urgency of reform. “Modern manufacturing and engineering are major drivers of the innovation needed to capitalise on the AI revolution and deliver on the Government’s growth agenda across new green skills technologies and opportunities. Yet all of this is at risk if we do not urgently ensure our skills system is properly fit for the 21st Century.”

Apprenticeship Levy

The shortcomings of the Apprenticeship Levy have further exacerbated the skills crisis. Since its introduction nearly eight years ago, apprenticeship starts in manufacturing have fallen by 42%, depriving tens of thousands of learners of valuable training opportunities. Stephen Phipson CBE, CEO of Make UK, has been vocal in his criticism. “The Apprenticeship Levy in its current form has been nothing short of a disaster. Apprenticeship starts in manufacturing have fallen by 42% meaning tens of thousands of learners have gone without invaluable training in the last eight years.” He has urged the government to take immediate action. “Government is sitting on a pot of cash that should immediately be ringfenced and spent on skills training. The first priority is properly funding courses, so colleges and training providers aren’t put off delivering higher-cost courses such as engineering. There also needs to be targeted efforts to recruit experienced tutors to train up the next generation in the skills we need now and in the future.”

The proposals put forward by the Industrial Strategy Skills Commission present a clear and actionable framework for addressing the skills gap. The economic impact of inaction is too great to ignore. Without urgent intervention, Britain risks falling further behind in the race to adopt and develop cutting-edge technologies. A well-trained workforce is the foundation of a strong industrial strategy, and securing long-term investment in skills training will be essential to the country’s economic future. The government and industry must now come together to implement these recommendations and ensure that Britain’s manufacturing sector has the skilled workforce it needs to thrive, with an emphasis on applied expertise and technological integration

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