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How should we manage the great skills shift?

Author: ICAEW Insights

Published: 28 Sep 2022

Amid acute requirements for upskilling and reskilling, does our skills infrastructure have what it takes to train the workforce of the future?

In the past two years, a sense of urgency has mounted among thought leaders over the UK’s need to upskill and reskill. CBI’s October 2020 report Learning for Life said that 90% of UK workers would need to reskill by 2030 to address the rise of new technologies and related economic shifts. The following month, McKinsey pointed out that effective upskilling and retraining would spur a national productivity gain of up to 12%.

In October 2021, the New Economics Foundation (NEF) argued that a key government objective should be a workforce resilient to shocks, with the mettle to lead the economy through rapid decarbonisation. However, it warned, current UK skills policy is “inadequate for the scale of the challenge”.

Taking a deeper dive into the carbon quandary, PwC’s August 2022 report The Energy Transition and Jobs cited upskilling and reskilling as vital for heading off a resourcing crisis: while the UK requires a 400,000-strong Net Zero Energy Workforce to deliver on its decarbonisation targets, there are currently only 270,000 people in our entire oil and gas sector – a fifth of whom are expected to retire by 2030.

Trainer drain

In terms of potential solutions, the Confederation of British Industry urged the government to evolve the Apprenticeship Levy into a flexible Skills and Training Levy, to unlock business-based investment in high-quality, accredited training. It also called for the introduction of training tax credits for SMEs. NEF, meanwhile, proposed an ambitious Future Skills Scheme: a national strategy for preparing workers for the economy of tomorrow.

However, none of those recommendations has materialised. And while the government has convened a Green Jobs Taskforce, that unit has yet to unveil a careers and skills strategy.

Paul Warner is Director of Strategy and Business Development at the Association of Employment and Learning Providers (AELP): a body representing around 800 providers of training and vocational programmes for every level of post-16 study. From his vantage point, there is “no easy answer” for making the UK skills environment more cohesive.

“It’s a volatile situation right now,” he says. “For example, inflationary pressures are affecting funding bands for post-16, technical skills training – and some rates remain unchanged since 2014. Similarly, much of the funding for apprenticeships hasn’t changed since the major reforms of 2017.”

Inflation is also biting the skills sector itself. “To secure better pay, trainers have been tempted away from their roles to the jobs they’ve been training others to do. It’s a vicious circle: learning providers need trainers to function – but trainers are exiting to apply their knowledge elsewhere.”

Those issues, Warner notes, are exacerbated by an incredibly tight labour market, which always pushes skills down the agenda, because people can have their pick of jobs. “Plus, employers are trying to survive, too, and just want to fill their vacancies.”

Cliff edge

For Warner, apprenticeships remain the most visible and cohesive national skills strategy. Typically, he stresses, the majority are occupied by experienced employees looking to upskill or reskill, rather than young people – but in any case, he says: “I don’t get too hung up on whether upskilling or reskilling applies only to older workers. I think it applies to anyone.”

In Warner’s view, five years on from the reforms, apprenticeships are more relevant to specific occupations, employers and roles than ever – and there is “no doubt” they play a part in driving productivity. “However,” he says, “more must be done to motivate learners to take up apprenticeships – and employers to engage with them.”

One issue is that the Apprenticeship Levy scheme has incentivised employers to focus on upskilling and reskilling current staff – which enables bosses to claim levy money back without adding new recruits. Warner says: “Research consistently shows that existing staff deliver a higher return on investment after taking apprenticeships than new recruits. But there are two problems here.

“First, those people will be taking on costlier, higher-level apprenticeships that draw out more of the levy. Therefore, there are fewer opportunities available. Second, this means that apprenticeships for young people – our future workforce – have fallen off a cliff.”

Green clarity

Warner is also concerned about apprentices’ low minimum wage – who would be tempted to take on an apprenticeship if they could earn more stacking shelves? – but admits he is conflicted: “If it rises, employers could end up saying it’s unaffordable.”

As such, he suggests that a current underspend in the adult education field could be moved across to provide a wage top-up for apprentices – and take pressure off employers’ budgets.

But what of the broader context: the need to line up legions of green jobs to meet the net-zero challenge? “At present,” says Warner, “there’s an unhelpful lack of clarity around what green skills or green jobs actually are.

“If an electrician fits solar panels to a factory’s roof, does that automatically make his line of work a green job? If a steelworker makes sheet metal used in wind turbine parts and if a logistics worker transports those parts to the wind farm’s location, does that necessarily make their jobs green?”

If people take the view that green jobs are just slightly modified versions of existing jobs, that could undermine the credibility of the green agenda, he explains. In order to skill for those jobs, we must first understand exactly how they should look, then develop the right language for talking about their skills needs.

ICAEW Head of Business Simon Gray FCA says: “Our members regularly cite the availability of skills, together with challenges around retention and recruitment, as key issues facing the UK business community. The link between education and the needs of business – plus the importance of ongoing career training and development to boost productivity and attract talent – must be key priorities for all relevant stakeholders.”

Gray adds that ICAEW’s Q3 Business Confidence Monitor highlights current challenges with the availability of skills and the related impact on businesses’ ability to meet demand. “With that in mind, the development of green skills is a big opportunity – one that could help redress regional imbalances and drive prosperity across the UK. The main challenge is that, while the development of skills takes time, these skills are needed now.”

For further ICAEW resources on this topic, visit our Economy hub and register for our 19 October webinar The Future of Work – skills, retention and recruitment.

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