New data on skills shortages reveal both promising improvements and ongoing challenges for employers across various sectors. Despite a fall in skills shortages related vacancies, structural issues related to workforce skills investment persist, highlighting the critical need for strategic action to foster long-term growth and competitiveness in an evolving labour market.
Skills Shortages: New Report
A new report from the Department for Education (DfE) and Skills England, and based upon the Employer Skills Survey 2024 (ESS 2024), has found that the number of vacancies related to skills shortages as a percentage of total vacancies fell from 36% in 2022 to 27% in 2024. However, this still represents a 5% increase compared to 2017(22%).
In 2024, 6% of employers reported having at least one vacancy that was hard to fill due to a lack of suitable skills, qualifications, or experience among applicants. This represents a fall of 4% compared to 2022 (10%)
Whilst the fall is good news, more than anything this simply highlights that whilst the issues created by the COVID-19 pandemic have abated, the underlying structural issues within the British economy caused by a lack of investment in skills remains, and has indeed got worse since 2017.
Larger Firms Benefit More Than Smaller Businesses
The survey data reveals an uneven recovery from the pandemic-era recruitment challenges. Whilst large companies with more than 100 employees have seen their skill-shortages related vacancies drop from 34% to 19%, smaller businesses, particularly micro firms, continue to experience high levels of skill shortagess, with 42% of their vacancies related to skills shortages, a figure that is unchanged since 2022.
This difference highlights the resource advantages that larger companies have over small and medium-sized enterprises (SMEs). SMEs often struggle with fewer resources and face greater challenges in finding applicants with the right skills, qualifications, and experience.
Further Decline In Investment
As stated, the key finding from this report is that whilst the pandemic problems have now largely abated, the underlying structural problems caused by a lack of investment by British employers in skills has got worse, with the number of skills shortages related vacancies compared with the total having increased by 5% from 22% in 2017 to 27% in 2024.
The most disappointing findings from this report is that British employers have continued to cut their training budgets. The report found that:-
- The number of employers who have provided training to staff over the last 12 months has fallen from 66% in 2017 to just 59% in 2024
- In 2024, overall investment in training amounted to £53.0 billion, down from £59.0 billion in 2022 when adjusted for 2024 prices, a fall of 18.5% since 2011. This translates to per-employee expenditure of £1,700, compared to £1,960 in 2022, representing a 29.5% fall since 2011.
This highlights that for too long British employers have been getting away with importing cheap labour from abroad as a quick fix in terms of skills shortages, as opposed to looking to the long term and investing in training, new technology, and in boosting productivity. It would appear from these statistics as though British employers have learned nothing and done nothing to address the twin problems of skills shortages and poor productivity.
Mid-Level Talent Shortage Linked to Decline in Entry-Level Hiring
A new report published by the recruitment company, Robert Walters UK, highlights that British employers are now having difficulty in filling mid-level roles due to skills shortages and cuts in entry-level hiring.
The main findings from the report are:-
- Majority of Employers Struggling to Fill Mid-Level Roles: Over half of UK business leaders now report greater difficulty sourcing skilled mid-level professionals than three years ago, with many forced to offer higher salaries to attract talent.
- Reduced Graduate and Entry-Level Hiring Creating Bottlenecks: Ongoing cuts to early-career recruitment have led to a shrinking pipeline of professionals, intensifying competition for experienced hires and driving up hiring costs.
- Pandemic-Era Cuts Sparked Wage Inflation: The sharp reduction in graduate vacancies during 2020 set the stage for a surge in mid-level salaries by 2022, as companies scrambled to fill roles from a diminished pool of candidates when business confidence returned.
- Significant Pay Rises for In-Demand Professions: Fields such as accountancy, technology, legal services, and engineering have seen some of the steepest salary increases, over 10% in certain roles, as demand outpaces supply.
- Entry-Level Opportunities Plummet Again Post-2022: Since the rise of AI tools like ChatGPT, entry-level job postings have dropped by nearly a third. Recent graduate roles are now at their lowest level in seven years, further constraining future talent pipelines and exacerbating skills shortages
- AI and Automation Reshaping Early Careers: The rapid adoption of automation is causing employers to undervalue entry-level positions, often viewing them as dispensable rather than essential stepping stones for developing future expertise.
- Upskilling Becomes Critical for New Entrants: With fewer opportunities available, over 40% of early-career professionals feel pressured to enhance their skills independently just to remain employable in a changing job market.
- Long-Term Risks for Business and the Economy: The loss of structured entry-level paths threatens organisational ability to nurture talent internally, endangering sectors like green energy and advanced technology that already face acute skills shortages.
Decisive Action Required
To address the twin challenges of skills shortages and poor productivity, decisive action from the government is now more critical than ever. The data makes clear that market forces alone are not closing the gap; instead, they risk entrenching long-term structural weaknesses.
Firstly, the obsession amongst British employers with importing cheap labour from abroad as a quick fix must end. Hence, the tightening of the rules on work visas and other changes on that front over the last year or so are a step in the right direction
Secondly, the government must lead a national strategy for skills investment, one that actively incentivises employers to increase training budgets and prioritise workforce development. This could take the form of tax breaks for companies investing in employee upskilling, direct funding for modern apprenticeship schemes, and support for lifelong learning initiatives targeting both young people and existing workers. The current Government's announcements in terms of Skills England and its new industrial strategy are welcome initiatives, but it needs to go further
Targeted support for SMEs, moreover, is essential. Smaller firms face disproportionate barriers when it comes to accessing training resources and attracting skilled talent. Government-backed training grants, regional skills hubs, and simplified access to vocational education can help level the playing field.
Furthermore, reversing the decline in entry-level opportunities should be a top priority. Policies that encourage early-career hiring, such as wage subsidies and partnerships between industry and education, would help rebuild the talent pipeline - a pipeline that is critical in terms of future mid-level expertise.
Finally, a renewed focus on boosting productivity through investment, such as in digital infrastructure and new technologies, shoud underpin all efforts.
Only by tackling these issues holistically can Britain ensure sustainable growth and global competitiveness in the years ahead.
