THE BLOG
01/10/2013 15:01 BST | Updated 23/01/2014 18:58 GMT

Jobs Spare but Skills Rare: Why the UK's Skills Shortage Could Derail Economic Recovery

As the Conservatives settle down in Manchester this week to discuss the UK's future, boosting employment will surely be a key agenda item. Central to these discussions will be arguably the biggest thorn in the side of the UK labour market: the acute shortage of higher level skills.

There are some 2.4million unemployed in the UK, but at the same time 600,000 unfilled jobs across all skills and sectors. It is a bitter paradox caused by employers being unable to find the skilled workers they need, particularly in more technical areas such as IT, construction and engineering.

This week we launched the Hays Global Skills Index 2013, in collaboration with Oxford Economics, which aimed to dig down into the efficiency of labour markets around the world and identify imbalances between the supply of skilled labour and the demand for those skills among employers. The findings revealed a stark picture for the UK, which is currently suffering one of the worst talent mismatches in the Europe - with only Spain, Portugal and Ireland lagging further behind.

It is no surprise then that some companies have publicly bemoaned the lack of UK talent, including Dyson, Siemens and BAE Systems. James Dyson himself has been vocal about the difficulty of recruiting engineers for UK positions compared to the relative ease of recruitment in Asia.

So how can the UK build a stronger skills pipeline for sustainable recovery and growth?

In the short term, the route to filling these roles is revisiting the UK's policies around skilled immigration. Unfortunately, immigration is an issue that has too often been hijacked by politics and discussed as a 'catch-all' issue, eroding the crucial delineation between skilled and unskilled labour. The debate must now move away from generic immigration and towards a focus on skilled migration, allowing businesses to source the talent they need, regardless of nationality.

This argument was voiced by Boris Johnson last month in his proposals for a so-called 'London visa' to facilitate the access of exceptional talent to the capital in the areas of technology and fashion. Yet we need to look beyond these areas (and beyond London) into science, engineering and mathematics, which are critical to boosting growth and the UK's international competitiveness. The Royal Academy of Engineering has estimated that the minimum number of STEM graduates (science, technology, engineering, and mathematics) needed to keep industry fully resourced is around 100,000 per year. Right now, only around 90,000 STEM students graduate annually in the UK - and up to a quarter of them go on to choose non-STEM occupations. This leaves a big gap. For leading firms to succeed in the UK, the government must make it easier for world-class talent to join and contribute to the economy - regardless of where it comes from.

We believe that an international agreement on a priority skills visa process should be implemented, allowing individuals with critical skills to be granted fast-track status. Sluggish application processing also needs to be countered by a requirement for 'skilled' work visa applications to be addressed within a set number of days from submission - ideally no more than a month.

In the longer term however, education policy and resources must be aligned far more closely with the needs of businesses - preventing students coming into the world of work with a degree on paper, but few job prospects beyond. This means education authorities working more closely with employers to create the skills required to meet the demands of industry, as well as easing the transition for students into employment. With higher education becoming evermore expensive however, creating the incentives to motivate young people to study in these STEM areas will also be important.

It is no coincidence that Germany, with its strong tradition of vocational education and apprenticeships, has one of the lowest rates of unemployment in Europe. Some UK companies are taking a lead in creating a similar ecosystem here. Last year for example, Rolls Royce opened a new state-of-the-art Apprentice Academy in Derby, where on completion of training apprentices find work in the supply chain, before moving on to more senior positions. While these companies should be applauded for their initiatives, more needs to be done by government to foster an environment where vocational training is a cornerstone of the UK's education system.

Unless action is taken now, the reality of the UK skills shortage is here is stay. If the government is serious about long-term economic recovery, filling the ever-widening talent gap must be a priority. The alternative is to leave huge numbers of skilled roles unfilled. That will lead to reduced investment, lower GDP growth, lower future job creation and condemn thousands of people to long-term unemployment.