Market Update September 2014: Skills Gaps & Jobs - 2015 and Beyond

By 2025, Ernst & Young predicts there will be a world shortage of around 56.5 million skilled workers. That is a skills shortage equivalent to the entire population of South Africa, which, by the way, is estimated to have the 24th largest population in the world.

It’s a startling prediction and provides us with food for thought as we focus on helping people develop the skills they need to succeed in the global community, which is of course a key focus as part of the City & Guilds group.

Earlier this year, at the annual Education Investor Summit, City & Guilds CEO Chris Jones spoke about the vocational education market in the UK. I thought I'd share a few of the key messages with you. Three of the main driving forces, or secular trends, that are shaping the future of the vocational education market in the UK are skills gaps, perception and politics, and funding.

Skills Gaps

We all know that the UK has a fundamental issue of skills gaps, however this issue goes beyond borders – it’s a global problem. The Boston Consulting Group (BCG) performed simulations on 25 major economies to quantify the extent of labour shortages and surpluses for 2020 and 2030. Overall, by 2020, many countries will be in surplus. By 2030, however, there will be a massive shortfall.

Countries that have experienced slow or difficult economic recovery find that the skills gap is accelerating. And with global competition for jobs, the problem is exacerbated. Ultimately we could be faced with the problem of a 56.5 million shortage of skilled workers in 10 years’ time.

Skill-shortages vacancies (jobs that cannot be filled because the skillset cannot be found) have doubled since 2009, and youth unemployment still remains very high. This creates a clear need for high-quality intervention programmes to increase these young people’s employability prospects.

Perception and Politics

Closely linked to skills gaps is perception and politics. The press, the politicians and the general public are starting to take notice of the skills gap problem. The good news for us is that the perception of vocational education as a whole is starting to change and in a very positive way.

There’s also more research being published and coming to attention that shows a clear correlation between investing in vocational education and training – and improved productivity and employment rates.

The European Centre for Development of Vocational Training has found that investing in adult learning can increase productivity. And a piece of research City & Guilds commissioned from the economic research agency SQW a few years ago, on the economic impact of apprenticeships, found that the Government’s investment would drive wide-ranging economic benefits – lower benefits payments, more cash flow for government from taxes and overall increased competitiveness for the UK. SQW projected the business and tax benefits would combine to a total of £5.57 billion added to the UK’s economy – higher than predicted returns from the 2012 Olympic Games.

Funding

For decades, we’ve been asking ourselves the question… who should be in the ‘driving seat’ for vocational and skills training? The individual or the employer?

Skills Gap - Private Sector Spending

We’re currently seeing a material shift to a more employer-led funding system. Let’s take UK based employers expenditure as an example. In 2013, UK employers spent some £43bn on vocational education and training. Private sector spending on vocational training is strong and will keep growing. It’s imperative for business to invest in skills development as it’s critical to their business strategies and their future survival. This is true worldwide.

Overall, the quantum of public funding is projected to remain relatively stable at just over £4bn per year. The way that funding is directed is changing. We are seeing a particular shift away from adult learning and towards programmes like the Employer Ownership Pilots which give employers more direct control. This will continue to result in consolidation amongst colleges and training providers – and also a focus on quality, success rates and employment outcomes.

In Summary

The UK vocational education market is healthy, vibrant and a strong investment opportunity now, and for the foreseeable future. The drivers of growth remain positive and, in turn, will continue to present attractive opportunities.

Key areas of interest for the future are:

  • The potential remains for buy & build strategies
  • Content, assessment and certification are becoming clear opportunities
  • Employer funding models becoming more important
  • International accessibility and scalability

What does it mean for employers? Those progressing with vocational education must:

  • Focus as much on the learning model as the business model
  • Focus on proving competence and capability, not simply chasing funding
  • Focus on the long-term impact that your investment will have on individuals, businesses and the economy

Ultimately, those that focus most on efficiency and effectiveness will win out in the long term. City & Guilds Kineo services like Managed Learning Services are focused exactly on achieving these aims. 

 
 

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