Skills Shortages UK Manufacturing – Solving The Crisis

Posted 23rd November 2018 by Marie McBeth & filed under manufacturing.

The UK Skills Gap

With continuous demand for skilled employees in some of the country’s highest growth sectors, the UK skills gap is a major and well-publicised crisis that, according to a recent report by Open University (OU), is costing the UK more than £2bn a year. The OU found 91% of organisations struggled to find skilled talent in the last 12 months, having to spend money on higher salaries, recruitment costs and temporary staff as a result.

The latest British Chambers of Commerce Quarterly Economic Survey also indicates the skills shortages are reaching critical levels, with 75% of businesses in the manufacturing sector and 71% in the services sector reporting recruitment difficulties. In manufacturing, new jobs still outweigh the number of skilled workers to fill them.

Brexit is adding a further level of uncertainty for companies and their ability to retain and recruit the best of the world’s talent. Signs that this is starting to impact UK manufacturing and employment are becoming evident as UK manufacturing output fell to its lowest level in more than two years in October 2018. New orders and employment both fell for the first time since the Brexit vote as domestic and overseas demand were hit by a combination of Brexit uncertainties, rising global trade tensions and weak demand for cars.

As we highlighted in our previous blog on Industry 4.0, digitisation is set to cause even more disruption in the decades ahead, making it crucial for the current workforce to embrace continuously adapting skill sets and a changing workplace landscape.

What Are The UK Government & Manufacturing Industry Doing To Tackle Skills Shortages?

29% of vacancies in manufacturing currently are considered hard to fill. The EEF, The Manufacturer’s Association know that a lack of technical skills and an insufficient number of applicants are the key drivers behind this and the reason why three-quarters of manufacturers have struggled to fill engineering roles in the past three years
80% of UK manufacturers also agree that skilled workers are the most important factor for achieving quality across the supply chain: ranking higher than technology, testing procedures and financial investment. Yet almost 50% say said they find they it difficult to develop these skills amongst their workforce, with many predicting the problem to worsen over the next five years. 30% believe the lack of access to skilled workers will be problematic in the next five years, putting the future of quality manufacturing at risk

We look at a number of measures below which will may go some way to helping fill the skills gaps in manufacturing;

1. 2018 Budget

The recent October 2018 Budget included a number of announcements to help stimulate investment and promote talent which will benefit UK manufacturing;

The Annual Investment Allowance (AIA) will rise from £200,000 to £1m for two years, allowing more expenditure on plant and machinery equipment to be set against business income
A £695m initiative to help small firms hire apprentices. Small businesses taking on apprentices will now only have to contribute 5% towards the training, rather than the previous 10%
The Greater Manchester area will see a new fund to help small businesses improve their skills
Investment In R&D
- Catapult Centres – £115m for the Digital Catapult Centre and another £70m for the Medicines Discovery Catapult in Alderley
- Increase in Industrial Strategy Challenge Fund by £1.1bn. This includes up to £121m for the industry-led ‘Made Smarter’ initiative, which aims to support the transformation of manufacturing through digitally-enabled technologies, such as the Internet of Things (IoT), artificial intelligence (AI) and virtual reality, with pilots in the North West and Cornwall.
- A further £235m to support the development and commercialisation of quantum technologies
- UK Export Finance’s (UKEF) direct lending facility will increase by £2bn. To replace the EU investment bank if needed, an additional £200m will go to the British Business Bank. The new enterprise allowance will be extended, a measure the Federation of Small Businesses welcomes

2. Post Brexit – How To Retain EU Skills In UK Manufacturing

EU nationals currently make up 11% of the manufacturing workforce typically in plant, process and machine operative roles, skilled trades and associate and professional roles e.g. engineers
To date, recruiting EU Nationals has been relatively straightforward due to the flexibility provided by the free movement of people across the EU
Moreover, around two thirds of manufacturing employers say there is an insufficient number of UK nationals applying for jobs. It’s not just a lack of volume from UK applicants, but also the quality of those candidates. A third of manufacturers say the skills they need cannot be found within the UK labour market
Worryingly with Brexit around the corner, the EEF (the UK manufacturers association) said recently said more EU nationals are leaving manufacturing businesses and fewer applying for job roles

The recruitment industry trade body, the Recruitment & Employment Confederation (REC) which has been lobbying the UK government on Brexit and EU Workers rights has just announced key dates and guidance which will enable UK manufacturing companies to plan ahead to retain current EU staff;

Key Dates

November 2018 – government will publish new post-Brexit Immigration whitepaper
New Immigration Bill to go before Parliament
29 March 2019 the UK will leave the EU
A transition period will take effect from 31 December 2020 allowing continued free movement
A new immigration system will take effect from 1 January 2021

To retain existing EU workers post Brexit, UK manufacturers should now be starting to encourage their existing EU workers to obtain ‘Settled’ or ‘Pre-Settled’ status which will ensure their right to live and work in the UK after Brexit is introduced;

What is ‘Settled Status’? EU Nationals who have lived in the UK for more than 5 years will have to apply for ‘settled status ‘ before the end of the transition period (31 December 2020)
What is ‘Pre-Settled Status’? EU Nationals who have lived in the UK for less than 5 years will have to apply for ‘settled status ‘ before the end of the transition period (31 December 2020)

3. Post Brexit – Recruiting EU Manufacturing Skills To The UK

The UK government is still currently drafting what the new immigration system will look like. A proposal put forward by the government is that visa applications to live and work in the UK would be prioritised based on skills level and salary. The REC however, is lobbying the government and pushing for visa applications based UK skills shortages

4. Upskilling Existing Manufacturing Workers

With Brexit looming, UK manufacturers can’t bank on a future UK migration system that will meet their needs and will need to look at how they can drive up the skills base within the UK.
46% of manufacturers have said they prefer to train staff on the job rather than recruit using apprenticeships or universities. Y.despite the number of UK manufacturers taking training into their own hands,

5. Upskilling & Bringing On New Talent – Apprenticeships

Apprenticeships have been part of manufacturing businesses for decades. Recent stats show just 26% of manufacturers recruited using apprenticeships, although in food and drink 40% of manufacturers had effective apprenticeships (but only 7% had looked at upskilling existing staff)
In response to safeguarding the skills they need post-Brexit, almost 4 in 10 manufacturers are now increasing their investment in apprenticeships. The recent Budget lowering of the contribution level from 10% to 5% for the Apprenticeship Levy for small businesses will surely increase this figure
UK manufacturers are looking at using apprenticeships to upskill existing members of staff, not just new recruits as well as offering apprenticeships outside of engineering
The face of apprenticeships is also changing. The number of UK apprentices viewing their apprenticeships as a genuine career path has increased by almost 70%, according to extensive new research from over 15,000 individuals, with a two-thirds increase in those citing apprenticeships as a valid career path. An analysis of the post-apprenticeship data generated over five years reveals how more apprentices than ever are recommending their route as a career path. Apprentices willing to suggest their programme’s employer to a friend has also reportedly averaged 98% in the past five years

6. Bringing On New Talent – Technical Secondary Schools (UTCs)

Recent stats show just 26% of manufacturers recruited via universities
Based on current UK university enrolments there is a mismatch between market demand for skills and the future supply of talent. In 2017 there was a 42% gap in students enrolling at university in manufacturing-based courses compared to 59,000 industry vacancies
UTCs are perhaps an alternative solution
What are UTCs? Non-selective, publicly funded technical secondary schools for 14-19 year olds which offer a curriculum and provides the opportunity to study for both academic and technical qualifications
There are 49 UTCs across England, each teaching one or more technical specialisms that meet the skills shortages in their region
These include amongst others: engineering, manufacturing, health sciences, cyber security and digital technologies
UTCs are established where employers need them most and where there are pronounced skills gaps
UTCs build their pupils’ expertise in these subject areas working closely with employers on real-life technical projects
Employers also mentor students and provide opportunities for work experience and work place visits.
In 2018 UTCs showed record results for their student leavers for the fourth year running;
- Over 87% of UTC students have gone onto University, apprenticeships and full-time employment compared to a national average of 74%
- 74% of UTC leavers going to University have started STEM-related courses compared with a national average of just 46%
- Apprenticeships awarded are over four times the national average with 29% of UTC students going on to apprenticeships compared to just 7% nationally
- In 2018, over 500 apprenticeships have been awarded to UTC students by the UK’s leading employers including Aston Martin, Royal Navy, JCB, Balfour Beatty and Rolls Royce

Other actions include increasing graduate programmes, looking to recruit employees from other sectors and industries with transferable skills and increasing training budgets for existing members of staff.