Overcoming the Great British Skills Crisis

Manufacturing is the beating heart of the British economy. It’s central to our long-term recovery from the pandemic, helping to grow GDP through export trade and a key part of Britain becoming more self-reliant in a challenging geo-political climate.

The workforce in the manufacturing sector is one of high-skill, and companies pay significantly higher wages for these skills than the national average. Yet despite attractive pay, job vacancies are at the highest they have ever been. In August, the ONS reported 93,000 job vacancies in the manufacturing sector.

Labour scarcity is not limited to the UK. ?In Germany and the US, job vacancies have also reached an all-time high this year. But when you consider the UK’s current unemployment figure of 1.3 million, you would expect that there was a surplus of workers available. So why can’t manufacturing firms fill their job vacancies?

‘The Great Resignation’ began during the pandemic, a trend that saw people either changing careers or leaving the workplace entirely. Many workers took stock to reassess their lives, with an exodus of older workers from the labour market. Others chose to start up their own businesses, with the number of business start-ups registered on Companies House at an all-time high during the pandemic. More women have left the workplace post pandemic, with many citing increasing childcare costs or lack of available childcare as the reason.

The impact of the pandemic and Brexit has resulted in a smaller UK labour market and, consequently, fierce competition for skilled workers. The International Monetary Fund staff research report dated January 2022 reports that there is: “…a mismatch between the types of jobs that are available and the willingness of people to fulfil them”.

Whilst the manufacturing sector is adapting to attract talent, offering flexible working patterns, in-depth training and educational opportunities, government help is still needed to attract talent back to the workplace. But what can they do?

A solution to the problem is to nurture our skills economy so that we can help our unemployed and economically inactive people back into employment.

Make UK’s 2022 ‘State of the Industry’ report revealed: “28% of manufacturers said that greater investment in apprenticeships would make a big difference to their ability to grow”.

The government’s Apprenticeship Levy, introduced in April 2017, was designed to increase the level of employer investment in training to drive up the number of people accessing the workplace through apprenticeships. However, the number of manufacturing and engineering apprenticeships actually fell by 11% between 2016 (pre-apprenticeship levy) and 2021.

Manufacturing firms have said levy fund applications can be restrictive, that the funds available are not reflective of the true costs of apprenticeships, the process is burdened with red tape and that the 24 months given to spend allocated levy funds is simply not long enough.

There is a compelling requirement for the process to be reformed to reflect the full cost and timeframe of training apprentices. This could be achieved by doubling the time companies have to spend their levy funds and reviewing levy funding band limits. Raising the band limits to reflect full training costs would act as a stronger incentive for companies to take on apprentices.

At Lloyds Bank, one of the ways we’re fuelling the creation of such roles is through our support of the Apprenticeship Levy Transfer Fund. The fund allows large employers to pledge their unspent levy, making it easier and more financially viable for smaller companies to create apprenticeship roles. Our support of this initiative sees us transfer a portion of our levy to smaller businesses to help fund the training and assessment costs of apprenticeships.

With June’s ONS data indicating that manufacturing currently accounts for 15.9% of all business investment, the sector still represents a tremendous place to work, and reform of the Apprenticeship Levy would help firms to attract the long-term talent and skills needed to drive its growth.?