Addressing the skills gap: A key to economic success

The number one issue we hear from businesses across the city is the skills and labour shortage. Trying to really understand exactly what skills we are missing and the impact this has on productivity and growth has been a bit of a mission in recent months.

We have hosted a number of round tables with members to explore the skills gap and we recently held a skills conference at Edinburgh College to really open up the discussion. The skills shortage is clearly a pressing concern for businesses, prompting the Chamber to initiate this collaborative event to develop solutions to some of Edinburgh’s talent and skills challenges. Representatives from businesses, Skills Development Scotland, Edinburgh College, Universities, and the Chamber came together for an initial discussion and series of workshops.

Throughout our mission to understand this better, we were also keen to look at how we make investing in staff, upskilling and re-skilling, more compelling to businesses. We wanted to understand better the return on this investment to make the case to businesses. There were some startling stats in a range of reports, particularly the report by McKinsey & Company titled “The economic case for reskilling in the UK: How employers can thrive by boosting workers’ skills.” The report presented some eye-opening statistics:

• Reskilling would yield positive economic returns in about three-quarters of cases for UK employers.
• 94 per cent of today’s workforce lack the full suite of skills they will need in 2030 to perform their jobs well.
• On average external hires are paid 20 per cent more than reskilled internal workers.
• 94 per cent of employees say they would stay at a company longer if it invested in their career development.

In addition, the report claims that effective reskilling can increase productivity by between 6-12 per cent. Addressing the skills gap is crucial to enhancing productivity, which has remained stagnant over the past 30 years in Scotland, in spite of successive strategies to address this. The UK is in the third quartile of OECD countries for productivity.

A 2022 survey revealed training activity has decreased across Scotland; access to training offered by employers is at its lowest since the survey began in 2011. Yet demographic changes in the city, particularly an ageing population, will present challenges, as skills and experience need to be replaced. This may impact sectors projected for high growth such as health and social care, technology and data, and renewables.

In Edinburgh, our successful local economy’s resilience is largely due to a well-educated workforce providing a deep talent pool. The city boasts a large proportion of workers in high skilled occupations – over 50 per cent, which is significantly higher than comparator cities like Manchester, Bristol, Leeds and Glasgow.

While we benefit from the excellent work of Edinburgh College and our four Universities, there is a need to encourage businesses to invest more in their workers in this rapidly evolving world.

During the event, workshops were conducted with a focus on Skills Gaps and Deficits, Upskilling and Reskilling, and Retention of Talent. Through these sessions, we identified several areas for further exploration:

• There is a need to actively promote work-based learning and foster a culture of learning within organisations, recognising the importance of meta and transferable skills.
• Diversifying recruitment and offering parity of esteem between post-school pathways is crucial. For instance, the skills offered by College graduates should be valued alongside those of University graduates.
• Embedding learning into organisations is key. There is an urgent need to simplify the process for individuals to improve their skills through retraining or upskilling programmes designed to fast- track people into new careers.
• Retaining talent within businesses and the region is essential. Churn is costly for businesses in terms of finances and time. To better achieve this, organisational cultures need to encourage a greater sense of employees being valued through career development and learning. Businesses would also benefit from improved signposting by Government and Colleges regarding available upskilling support.
• Greater transparency over funding available for tackling skills issues is essential for progress in addressing skills gaps and deficits, and improving productivity.

The Edinburgh Chamber has also advocated for the creation of a Modern Industrial Strategy for Scotland. This strategy would consolidate various standalone strategies, outlining long-term goals for our economy and charting the path to achieve them on a cross-party basis. Addressing our national ability to meet the skills needs of our businesses will be a key part of that.