Opinion

The answer to the UK productivity slump? Fix the skills gap

5 min read

08 October 2019

If we want the UK to survive this wave of economic uncertainty, then it's time to re-direct our focus to improving our employees' skill set.

Why does the UK have the lowest levels of productivity among the G7 countries?  It’s a puzzle that everyone from entrepreneurs, academics and politicians have wrestled with for many years, but no one has found the missing pieces to finish the picture.

But I’m no wrestler, in fact, I was a handy amateur boxer, so let me throw the knockout blow to this argument.  The biggest issue that is dragging back our productivity? it’s the skills gap.

Where are the real-world skills?

The UK skills shortage will cost SMEs a stealthy £145,000.

Yes, we may have the highest levels of employment seen for decades, but the economy is hindered by an education system with outdated priorities. Thus failing to move with the times and is now only playing catch up. This means that although businesses have been able to recruit for the jobs they’ve created, the candidates don’t all have the level of skills and capabilities that allow firms to be more productive.

The ‘talent auction’

And of course, those who do have the right skills are in much more demand, which causes SMEs even more challenges as these people are basically up for auction. The bigger firms have the financial power to make the winning bid, offering wages and packages many smaller firms just can’t afford.

This is a major concern for businesses from John O’Groats to Lands’ End and will hit them directly in the pocket. Especially in the coming months as we have to deal with whatever happens after Brexit and the near-inevitable recession that will follow.

According to a new study by a recruitment firm Robert Half UK, the UK skills shortage will cost SMEs on average around £145,000 in the next year and is expected to rise to more than £300K during the next five years. The survey questioned 59 per cent of SMEs who said that a recession would further impact their existing skills gaps, which is a time when firms need staff performance at their peak.

It’s not all doom and gloom…

Recessions can present a lucrative opportunity for SMEs.

Recession can actually be good for savvy SMEs leading to a glut on new start-ups. Often due to forced economic circumstances, born after the 2008 downturn when the number of new firms being set up in the UK grew year by year. But for all the will in the world, if these start-ups want to be more than one-man bands and actually scale their operations delivered by skilled people, they’ll hit a brick wall in the shape of a very large skills shortage.

Quite simply the result of a misguided education sector blinkered towards academic qualification and universities offering courses not relevant to the modern economy.

The rise of ‘vocational training’

We are only recently starting to see vocational training stepping out of the shadows to be seen as a valid and preferential route to a career. However, we are so far behind the curve the economy remains hamstrung by our inability to produce skilled young people who can slot into a business and help address the productivity challenge.

Back to basics?

We need to change our attitudes towards “hands-on learning.”

If we’re going to reverse the situation and increase productivity we have to tip the scales in favour of practical learning, not just in the trades and areas like engineering. Therefore, alongside the reading, writing and arithmetic, they’re amassing a wealth of real-world skills that are applicable and useful to businesses.

From there we can create future employees that can be the jigsaw pieces business need to solve the productivity puzzle and continue the invaluable role SMEs play in the UK economy.