Regional Skills Assessment 2008: key issues for employers

We produce the Regional Skills Assessment each year, providing commentary on the changing labour market in the West Midlands to inform the work of a wide range of organisations. This post highlights key issues for employers arising from our skills assessment work this year.

Over the last five years there has been a significant shift in the balance of employment from manufacturing to services:

  • There has been significant new job creation in private sector services such as business & professional services, retail, hotels & catering and in public sector services such as health & social care, education and public administration.
  • But this has been offset by the shedding of significant numbers of jobs in sectors that have historically dominated the regional economy such as engineering (and in motor vehicles, mechanical and electrical engineering, in particular) and in other manufacturing industries such as ceramics, clothing and textiles.

Nevertheless, across all sectors of the economy there is an increasing demand for new and up-graded skills. Significant numbers of employers have responded by investing in the training and up-skilling of their staff, with a resulting reduction in the incidence of skill gaps and shortages.

However, some sectors (notably agriculture, engineering, other manufacturing, construction, wholesale and retail, and hotels and catering) still face significant skill gap and shortage problems and additional investment in training is needed.

At the same time, the West Midlands’ working age population is ageing in rural areas while in the region’s urban areas the population is becoming younger and more ethnically diverse. If employers are to meet their labour and skill needs in the future, employers need to widen their recruitment to include these groups.

The West Midlands has an under-developed private sector knowledge economy, which is vital for future growth and competitiveness of the regional economy.

The region performs poorly in terms of the recruitment and deployment of highly skilled knowledge workers. This has a significant impact on graduate retention. A significant proportion of graduates leave the West Midlands to secure their first job, notably those with a desire to work in better paid, higher skilled and higher value-added sectors of the economy.


Chart: Key knowledge industries in the West Midlands. Source: ONS Annual Business Inquiry 2006. Download full size chart (PDF, 37KB).

Nevertheless, many of the region’s businesses are of the view that graduate and other higher level skills could be critical to future business success. If this potential is to be unlocked and converted into real and tangible demand, however, action is needed to address issues such real or perceived gaps in graduates’ work-related skills and limited investment in graduate training and development by employers.

In response to these challenges the West Midlands Skills Action Plan (pdf, 458kb) calls for a step change in the region’s skills performance, based on meeting the targets set in the Leitch Review of Skills.

It is estimated that realising the ambitions in the plan would result in significant benefits for the regional economy with an increase an increase in GVA of some £25 billion (30%) and an increase in GVA per employee from a current £35,700 (10% lower than the current UK average) to £37,500 in 2020 (6% lower than the UK average) by 2020.

Growth in GVA is likely to vary widely by sector. While significant increases in GVA are expected in fast growing, high value-added sectors such as IT & telecoms, health & social care, construction, transport and utilities, where shortages of skilled and qualified staff have been a constraint on growth, more modest growth is expected in manufacturing industries typically dominated by relatively low value-added activity.

While businesses already face growing competition from overseas producers with a lower cost base, this is likely to be exacerbated by pressures for higher wages and other costs.

Conclusions

It is encouraging that the region’s overall skills performance is improving, driven principally by the significant numbers of employers that are investing in the training and up-skilling of their staff. More needs to be done, however, if the step change in skills performance required by the Skills Action Plan is to be achieved and the ensuing economic benefits are to be realised:

  • Further investment in skills by employers is required, especially in sectors such as agriculture, engineering, other manufacturing and construction, wholesale and retail, hotels and catering and health and social care where skill gaps and shortages remain a significant problem.
  • If they are to meet their labour and skill needs in the future, employers also need to widen their recruitment to include groups accounting for a growing share of the region’s working age population such as older people and people from minority ethnic groups.
  • Building on activity already taking place, more action is needed to unlock the potential demand for higher level skills to boost business growth and competitiveness.

Do you have any views on the key skills issues for the region – add a comment below and let us know!

Our related research

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: