House of Commons - Trade and Industry

Select Committee on Trade and Industry Fifth Report

3 Skill shortages and skill gaps

20. Analyses of skill-related problems in the economy make reference to two measurements, skill shortages and skill gaps. Skill shortages occur when employers encounter difficulties finding staff with the appropriate skills, experience or qualifications to fill vacancies. Such vacancies are referred to as short-skill vacancies (SSVs).[26] Skill gaps occur when an employer considers that an existing employee lacks the skills, experience or qualifications to be fully proficient at their job.[27] This is a subjective measure.[28]

Shortages and gaps in manufacturing

21. Diagram 2 shows the incidence of skill shortages and skill gaps across the five Sector Skills Councils that cover manufacturing. All manufacturing sectors covered by Sector Skills Councils experienced a lower than average incidence of short-skill vacancies as a proportion of total employment and all except one were below the national average as a percentage of vacancies. The average incidence of skill shortages across manufacturing was 4 per 1,000 employees, compared to a whole-economy average of 7 per 1,000 employees. 24.4% of vacancies covered by the five manufacturing Sector Skills Councils were short-skill vacancies, compared to 25% across the economy as a whole. In particular, food and drink manufacturing experiences one of the lowest incidences of short-skill vacancies of any sector covered by a Sector Skills Council.[29]

22. These figures, however, should be treated with caution. Although the overall figure for the sector is below the national average, the skill shortages reported by individual Sector Skills Councils show a high level of concentration in specific sectors. In particular, the sectors covered by Semta experienced a rate of short-skill vacancies 10% higher than the whole-economy average. When broken down by industry the figures range even more widely, from 46% of vacancies being short-skill vacancies in metals-related industries down to 17% for food, drink and tobacco manufacture. This variance means that the way in which manufacturing is defined can have a substantial impact on the sector-wide figures. Using an industry-based, rather than Sector Skills Council based, definition of manufacturing the average incidence of short-skill vacancies is 29%, 4% above the national average.[30] Whichever statistics are used, skill-shortage vacancies do not account for more than 1% of employment in any manufacturing sector—even where they account for a high percentage of vacancies.[31]

23. The Department of Trade and Industry and Department for Education and Skills both told us that manufacturing industry suffers from skill shortages to an extent roughly comparable to, or less than, the national average.[32] In the light of the above discussion, we regard this position as a simplistic reading of the current situation.

24. The incidence of skill shortages ranges widely across different manufacturing sectors and industries. Some industries, such as food and drink manufacturing, experience far fewer problems, on average, than the economy as a whole. Other industries, such as metals and wood-based manufacture, find that nearly half their vacancies cannot be filled due to difficulties in recruiting employees with the right skills. Understanding of this variation must inform skills policy at every level.

25. Diagram 2 also shows that across the five manufacturing sectors, 6.4% of staff were reported as having skill gaps, with 17.6% of employers having one or more skills gaps in their workforce. This compares to whole economy figures of 6% and 20% respectively. Skill gaps among the existing workforce therefore account for a far higher percentage of the manufacturing workforce than shortages in recruitment. Semta (19%), Cogent (20%) and Improve (21%) employers are more likely to have skill gaps among their workforce than the national average. Cogent (8%) and Improve (8%) industries also have an above average percentage of staff with skill gaps.[33] However, these figures beg the question as to whether an employer is aware of his organisation's skills gap. Those employers who are failing to keep up with, or be aware of, changes in their sector, may assess themselves as having a lower level of skills gaps than a disinterested and knowledgeable observer would objectively conclude.

26. The incidence of skill gaps varies less than short-skill vacancies between industries, and the sector-wide average remains constant regardless of which definition is used. There remains, however, a range of 10% between publishing, printing and recording media with the fewest gaps (12% of employers) and metals-related industries and food and drink manufacture with the most (22%). There is not necessarily a direct connection between shortages in recruitment and gaps in the workplace. Whilst metals-related industries suffered serious problems with both shortages and gaps, food and drink manufacture experienced substantially above average problems with skill gaps but relatively few problems with shortages.[34]

27. Skill gaps amongst the existing workforce account for a considerably larger percentage of the manufacturing workforce than vacancies caused by skill shortages in recruitment. Skill gaps vary less from industry to industry than skill shortages; however, a similar pattern of concentrated gaps in some industries, such as food and drink manufacture and metals, offset by below average incidence of gaps in other industries, such as publishing and printing, can be observed. Again we emphasise that detailed policy must take full account of these variations and should be as objectively based as possible.

What skills are in demand?

28. Technical and practical skills remain the single largest cause of both shortages and gaps for all five sectors covered by Sector Skills Councils, especially among science and engineering employers.[35] For example, Improve told us that "for food scientists and technologists one in four vacancies are permanently vacant, we cannot fill them."[36] The Trades Union Congress and Sector Skills Development Agency stressed intermediate level technical skills.[37] Skillfast-UK focused on specialist craft skills as well as entry level operative skills and the Society of British Aerospace Companies identified key shortages in technical engineering and Computer Aided Design and Manufacture.[38]

29. A significant number of our witnesses expressed concern at sector-wide failings in management and leadership skills. The CBI identified this as the priority for their members for future training and argued that the UK suffered from "a long tail" of firms with poor management.[39] Semta, Improve and Skillfast-UK all identified management and leadership issues in their sectors.[40] The Society of Motor Manufacturers and Traders (SMMT), British Printing Industries Federation (BPIF), Institution of Engineering and Technology (IET) and Institution of Mechanical Engineers (IME) all identified management as a major issue within their industries.[41] The IET and IME also told us that management skills should be a priority for investment, because better managers tended to do more to promote training among their workforces and also made better use of their training budgets.[42]

30. In their evidence to us, the EEF presented the results of a survey showing increasing employer demand for personal or 'soft' skills. Asked which skills were likely to be in greater demand in the next three years, respondents identified commercial awareness (62% of respondents), team working (56%), communication (55%) and problem solving (53%); alongside technical and practical skills (61%), management (57%) and IT (52%).[43]

31. The witnesses from the CBI told us that about one third of school leavers lacked sufficient competency in literacy and numeracy, and their concern was shared by many of our other witnesses.[44] There was not, however, universal agreement among witnesses as to whether these basic skills are the primary cause of skill shortages and gaps for manufacturing. The Sector Skills Development Agency, for example, accepted that basic skills were a problem in the economy as a whole, but the issues identified by the Sector Skills Councils for manufacturing related to a higher level of skills.[45] Similarly, Amicus argued that if manufacturing was to compete at the higher-value end of the market, training in the sector had to be redirected away from basic and level 2 (GCSE) skills and towards higher level learning.[46]

32. Technical and practical skills remain the major cause of skill-related problems across manufacturing as a whole. Management and leadership skills were a common cause for concern in the evidence we received and we believe that making management skills a priority area would have beneficial effects on the training of other staff. Basic skills are another key area of concern, along with commercial awareness and the vital but apparently neglected 'soft' skills such as communication and team work.[47]

33. The specific nature of skill demands varies widely from industry to industry within the manufacturing sector. We therefore believe that whilst high-level targets, such as those outlined in the Leitch report, have some indicative value, policy should be driven by demand in the workplace and the projected demands of employers and the workforce on a sector by sector, industry by industry basis—with Sector Skills Agreements and employer/workforce negotiation key mechanisms to achieving this. Blanket approaches to increasing skill levels run the risk of appearing to meet over-arching targets while not addressing the fundamental issues for some employers and employees.

26 Learning and Skills Council, National Employer Skills Survey 2005 (2006) (NESS) p. 26 Note that where a table or page number is given, it refers to the Main Report. Much of the data has been disaggregated by sector usingwww.ssdamatrix.org.uk or http://researchtools.lsc.gov.uk/ness/home.asp. This is indicated in the relevant footnotes. Back

27 Ibid., p. 64 Back

28 See paragraph 25. Back

29 Diagram 2 is based on data from NESS, 2005 Tables 3.10 and 4.9 Back

30 NESS, 2005 using www.ssdamatrix.org.uk, Short-skill vacancies as a proportion of all vacancies, all manufacturing industries. Back

31 NESS, 2005 using www.ssdamatrix.org.uk, Short-skill vacancies as a proportion of employment, all manufacturing industries and by Sector Skills Council. Back

32 Q 585; Appendix 14 (DTI) Back

33 NESS, 2005 Table 4.9 Back

34 NESS, 2005, using www.ssdamatrix.org.uk, Short-skill vacancies as a proportion of all vacancies by manufacturing industry, Proportion of establishments reporting internal skills gaps by manufacturing industry. Back

35 NESS, 2005 using www.researchtools.lsc.gov.uk/ness, Skills that need improving (summary) by Sector Skills Council. Back

36 Q 232 Back

37 Qq 72 and 228 Back