Reviews skills policy and offers thoughts and recommendations on how the UK can improve its performance
Organisations play a key role in increasing the skill levels of their workforce. Alongside other factors, this can be key in improving productivity and economic growth. To ensure sustainable and effective talent and succession planning, organisations need to understand their current and future business needs. But they must also remain aware of the wider skills context and policy environment in the countries in which they operate.
This factsheet examines the nature and key aims of the UK's skills policy. It explores the skills situation in the UK, covering the issue of low productivity, as well as careers advice, the graduate labour market, and skills mismatch.
What do we mean by skills and why are they important?
In today’s competitive and fast-changing world, the skills and capabilities of the workforce are vital to economic sustainability and growth. Workplace skills include the ability to:
- Write and understand reports.
- Perform numerical and analytical tasks.
- Use computers to help solve problems.
- Carry out job-specific technical tasks.
There’s a growing recognition that ‘essential skills’ are vital. These are the widely transferable skills such as communication, team working and problem-solving that all workers need in modern workplaces. They are fundamental to enable people to work together effectively, as well as how they engage with customers and other external stakeholders. These skills apply to all jobs even though new technologies are changing some technical aspects of work. Currently, there’s no universal framework to give education providers and employers a common definition and understanding of these skills. That’s why the CIPD joined other leading organisations, to create an Essential Skills Taskforce to champion a united approach. The Taskforce has now completed its work and launched a clear framework for assessing and developing these essential skills to provide individuals and employers with the tools they need to succeed in the future workplace.
Skills are not the same as qualifications, although they are often treated interchangeably. However, the process of gaining a qualification undoubtedly builds on and improves skills. Qualifications also provide specialist knowledge and they signal a wide range of desirable attributes to employers. These complement, but are distinct from, the generic skills we use in the workplace. Both qualifications and skills matter, as a workforce with a low level of qualifications is also one likely to have low levels of skills.
Skills are important for:
Economic growth and prosperity - The economic prosperity of a country depends on how many people are in work and how productive they are in the workplace. Better use of skills available in the workforce alongside increased investment in skills and training, has been shown to improve productivity. Growth in productivity and prosperity build the conditions for improvements in real earnings, creating a ‘virtuous’ cycle.
Individuals and organisations - For the individual, skills determine their employment and earning potential. For organisations, skills are vital to meeting both current and future business demands. To be successful and competitive, businesses must ensure their talent management and succession planning take into consideration what skills need to be sourced, nurtured, developed and retained now, in order to create successful and productive workforces of the future.
To tackle the UK’s underlying skills deficit, it’s not enough to focus on initial education and training. The vast majority of the 2030 workforce are already in work. Employers must understand the importance of investing in and improving the skill levels of employees, including learning ‘in the flow’ of work, in-house development programmes and coaching. It’s important that these activities are underpinned by a culture where learning is not only embedded, but encouraged across every level of the organisation.
The current skills situation in the UK
At a national level, too many UK businesses are built around low-skilled, low value jobs. Employers often design and structure work in a way that limits their staff’s use of skills resulting in skills-to-job mismatches and stagnant productivity. The UK also suffers from poor basic skills, weakness in the vocational education system and low investment in workplace training.
Research for our report Making the UK's skills system world class shows that whilst the UK performs well internationally on the provision of high level qualifications, with a large proportion of the workforce educated to degree level, we record only mediocre to poor scores on most other measures. A high proportion of our workforce has poor literacy, numeracy and computer skills, and evidence suggests that employers are training less and investing less in their workforces than two decades ago.
Improving how skills are both developed and used is at the heart of addressing the UK’s low productivity level and the associated high proportion of low-skilled and low-paid jobs in the economy. This needs better leadership and management capabilities, and better people management practices. Our report Over-skilled and underused: investigating the untapped potential of UK skills found that more than one third of workers have the skills to cope with more demanding duties than they currently have. At the opposite end of the scale, one in ten said they lacked all the skills needed to do their job effectively. Reducing this skills mismatch would help improve UK productivity. Analysis by the OECD suggeststhat average labour productivity could be increased by as much as 5% if the level of skills mismatch in the UK was brought into line with OECD best practice levels.
Organisations, in particular SMEs, need support to invest and develop their HR and people management capability to enable them to invest in their workforce’s skills and make best use of existing capabilities. We’ve been working to support small firms improve their leadership and management capabilities through our People Skills pilots - our report Building HR capability in UK small firms sets out the key lessons for policy makers and practitioners.
It could be argued that successive governments have focussed on expanding the high education system at the expense of further and vocational education. The OECD has identified a gap in the UK in terms of the provision of intermediate and technical level skills. Whilst the UK government has prioritised increasing the number of apprentices, the overall budget for post-16 provision has experienced significant funding cuts.
Our Over-qualification and skills mismatch research highlighted the issue of graduate over qualification. The government has estimated that 75% will not earn enough to fully repay their student loans, while too few young people consider vocational routes into work such as apprenticeships. While the current government is pushing for a bigger focus on apprenticeships, they are still often seen as a poor relation to higher education.
The nature and key aims of the UK’s skills policy
The UK’s skills policy needs to address the following challenges:
- Upgrade skill levels.
- Raise the demand for skills among employers.
- Improve the quality apprenticeships, further education and skills training.
- Encourage better working practices with an emphasis on developing and enhancing skills, and the experience at work.
- Improve leadership and people management competencies.
Skills policy in the UK is devolved which means that any policy initiatives are entirely the remit of the devolved administrations in Scotland, Wales and Northern Ireland, and only of the UK government when it comes to England.
The approach to skills policy in each of the four nations within the UK is different. However there are some common core themes and approaches including:
- Improved careers advice (for example, all age career services).
- Simplified and responsive further education (FE).
- Increasing the number of apprenticeships.
- Increased employer involvement in the skills system.
- Raising the demand for skills through increased employer ambition.
- Targeted support for skill-development in SMEs.
Key policy developments
The main development in skills policy in England recently has been the focus on apprenticeships and technical education.
The most recent set of policy announcements on reforming the vocational and technical education system are were set out Governments Skills for Jobs White Paper, which aims to put employers at the heart of the vocational education and training system. Plans include: enhanced employer leadership at a local level, via Local Skills Improvement Plans which will set out key changes needed to make technical skills training more responsive to employers’ skills needs; national oversights on skills gaps through the National Skills and Productivity Board; ensuring that all post-16 qualifications are underpinned by employer led standards; and additional funding for Further Education establishments to facilitate changes to provision that have been endorsed by local employers and to support colleges become accredited as College Business Centres, to support business development and innovation. The Skills for Jobs White paper also sets out plans to develop a lifetime skills guarantee for all citizens, and important component of this will be through reforming the funding of post-18 learning provision and integrating further education into the higher education loan system.
Apprenticeship reforms in England date back to 2012 and the Richards Review which made recommendations to simplify the system and ‘put employers in the driving seat’. These included developing new employer-led apprenticeship standards and reforms to apprenticeship funding.
A key aspect of this policy was introducing the apprenticeship levy in April 2017 which sees employers with a wage bill of over £3 million pay 0.5% of their total pay bill. The levy was designed to boost the number of apprenticeships and overall expenditure on training, Yet our research shows that fewer than a third of levy paying employers say it has led them to increase the amount they spend on training. This is down from 45% in July 2017, showing confidence in the levy has dwindled since it was introduced. There’s also concern that the research shows the design of the current levy is incentivising employers to use their funds in counterproductive ways, with a fifth of employers surveyed saying they use their levy money on training which would’ve happened anyway, to accredit existing skills, or that it has directed funds away from other forms of more appropriate training.
In light of these findings, we are calling for the apprenticeship levy to be replaced with a broader training levy. This would enable organisations to fund both apprenticeships and other forms of accredited training which are better suited to their needs.
We have also raised concerns that the apprenticeship system is not functioning as well as it could for young people. The majority of apprenticeships are allocated to existing employees over new labour market entrants, with an increasing proportion of opportunities going to those aged 25 and over. The introduction of the apprenticeship levy has tended to intensify long-running trends, with many employers concentrating their investment on existing employees through, for example, professional and managerial apprenticeships. This underscores the need to rebalance the apprenticeship system so that young people can access a greater share of apprenticeship opportunities.
The government is also reforming technical education as result of the Sainsbury Review of Post-16 skills. The broad objectives are to create a system that supports learners in achieving sustained skilled employment and meets the skills needs of a changing economy. In particular, the reforms aim to streamline a complex system of overlapping qualifications into a common framework of 15 routes – or T-Levels – which group occupations together in a two-year college-based programme with a high-quality work experience placement, aligned to apprenticeships. Our Reforming technical education research uncovered a worrying lack of awareness amongst employers about the new qualifications, highlighting the need for greater employer engagement and consultation if the reforms are to be successful.
Useful contacts and further reading
Books and reports
DEPARTMENT FOR EDUCATION. (2016) Report of the independent panel on technical education. London: The Stationery Office.
DROMEY, J. and MCNEIL, C. (2017) Skills 2030: why the adult skills system is failing to build an economy that works for everyone. London: Institute for Public Policy Research.
FOSTER, R. et al. (2018) Employer engagement and capacity to support T Level industry placements. Research report. London: Department for Education.
BASKA. M. (2020) Spending review leaves ‘big gap’ in skills investment, says CIPD. People Management (online). 26 November.
CROWLEY, L. (2019) How can businesses make the most of the skills in the UK workforce? CIPD Voice. Issue 17, 7 March.
CROWLEY, L. (2020) Upskilling and reskilling now to prepare for the post-pandemic economy. CIPD Voice. Issue 23, 16 April.
CROWLEY, L. (2020) Urgent need to boost employer awareness of new technical qualifications. CIPD Voice. Issue 25, 21 September.
McGUINNESS, S. and ORTIZ, L. (2016) Skill gaps in the workplace: measurement, determinants and impacts. Industrial Relations Journal. Vol. 47 No 3, May. pp253-278.
OWEN, J. (2020) UK faces skills crisis as inflow of EU workers plummets. People Management (online). 27 November.
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This factsheet was last updated by Elizabeth Crowley.
Lizzie Crowley: Senior Policy Adviser, Skills
Lizzie is CIPD’s employment and skills policy and research professional. She is experienced in developing high-quality research to inform organisational practice, policy and shape the public debate.
Before joining the CIPD in 2016, she led youth labour market research and policy development for The Work Foundation and developed research for public and private sectors. She has published a number of influential reports on skill policy and youth unemployment and appears regularly on national and regional TV and radio.
Lizzie is a Sociology graduate with a master's degree in Social Science Research Methods, both from the University of Glasgow.
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