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.
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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 has come together with other leading organisations, to create an Essential Skills Taskforce to champion a united approach. The Taskforce will develop 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 on-the-job training, in-house development programmes and coaching.
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 limit 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.
Apprenticeship reforms date back to 2012 and the Richards Review, which put forward 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. In 2016, we surveyed 275 employers for their reactions to the levy. We found that nearly one third of organisations believed the levy would encourage them to develop an apprenticeship programme that would help them to build key skills. A similar proportion thought the levy would help them to increase the quantity of apprenticeships they offered.
However, our survey also found concerns that the levy could have negative unintended consequences squeezing out training opportunities for other sections of the workforce. Almost a third of organisations thought the levy would cause them to reduce their investment in other areas of workforce training and development. A further 22% believed it could also encourage employers to accredit training they would otherwise be running anyway as apprenticeship schemes. Interestingly, only one in five respondents thought the levy would drive up the quality of apprenticeship schemes.
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 latest research, Reforming technical education, uncovered a concerning 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.
BISHOP, D. (2015) Small firms and the failure of national skills policies: adopting an institutional perspective. International Journal of Training and Development. Vol 19, No 1, March. pp69-80.
BURT, E. (2018) Employers lack staff to deliver T-Level work experience, report warns. People Management (online). 5 September.
CROWLEY, L. (2019) How can businesses make the most of the skills in the UK workforce?CIPD Voice. Issue 17, 7 March.
HOWLETT, E. (2019) UK employers express concern over shortage of skilled candidates. People Management (online). 28 August.
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.
MEINERT, D. (2017) Is your workforce ready? HR Magazine. Vol 62, No 5, June-July. pp42-48. Reviewed in In a Nutshell, issue 69.
CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR.
Members and People Management subscribers can see articles on the People Management website.
This factsheet was last updated by Elizabeth Crowley.
Elizabeth Crowley: Skills Adviser
Elizabeth has recently joined the CIPD as a Policy Adviser. Elizabeth is a policy and research professional with over 13 years’ experience in the employment and skills arena, having worked with both the public and private sector to develop high-quality research to inform organisational practice, public policy and shape the public debate.
Prior to joining the CIPD Elizabeth led The Work Foundation's research and policy development on the youth labour market – and has published a number of influential reports on youth unemployment. She has regularly appeared on national and regional TV and radio, including BBC Breakfast, BBC the One Show, the Today Programme and Channel 4 news. Elizabeth graduated in Sociology and has a master's degree in Social Science Research Methods, both from the University of Glasgow.
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