Pearson : Getting skills right more vital than ever post-referendum

As the UK carves out a new economic future following the vote to leave the EU, ensuring everyone has the skills to compete is more important than ever. Yet acute skills shortages are holding back businesses across all regions and many sectors, including manufacturing, construction and professional services. That's according to this year's CBI/Pearson Education and Skills survey.

The survey of nearly 500 companies, together employing over three million people, was completed before the EU referendum and shows firms anticipating a growing skills gap. Leaving the European Union only heightens the urgency for action.

Business commitment to developing current and future talent remains strong - but there are real concerns about some policies, according to the survey. The Apprenticeship Levy is a particular worry - the Department for Education, with an expanded remit, will need to give serious consideration to the current design and timetable.

The survey reveals:

• There is a welcome, growing demand for higher skills: over three quarters of businesses (77%) expecting to have more jobs for people with higher-level skills over the coming years and needing more people with intermediate-level and leadership and management skills (balances of +42% and +67% respectively)
• Firms are committed to developing talent in-house: with only 42% of training done externally, the majority use an in-house dedicated training and development budget (76%), mentoring and coaching opportunities (68%) or support employees to study part-time (73%)
• But there is a concern about future shortages: over two-thirds of businesses (69%) are not confident about filling their high-skilled jobs in future (up from 55% in 2015).

Josh Hardie, CBI Deputy Director-General, said:

'A successful future for the whole UK rests on our education and skills system. Following the vote to leave the EU, the UK must carve out a new economic future and this is an area where we must take action to support our competitiveness and prosperity.

'There are very positive signs throughout the country with more businesses supporting schools, offering careers advice and investing in workplace training - firms need to keep upping their game in this area.

'Skills are a top business priority but over two-thirds of firms don't think they will be able to get the people they need. Getting the skills and education system right across the country, particularly in partnership with the devolved nations, will be a big challenge ahead for the new Secretary of State.

'The recent announcement of new high-quality vocational routes to sit alongside A-levels was a positive step towards increasing access into skilled careers and something the CBI has called for repeatedly.

'Now the priority is getting the Apprenticeship Levy fit-for-purpose as it will need a genuine change of direction if it is to work for apprentices, business and the economy. Nine months out from the planned start date businesses still lack vital information - the new administration should take the time to get this right.

'Business remains committed to working with them to achieve this - but time is running out.'

Rod Bristow, President of Pearson's UK business, said on the finding that many employers have openings for high-skilled employees:

'This is an important reminder, at a time when some say too many people go to university, employers are 'voting' for greater access to higher education with their job offers. We need a more informed debate about the skills higher education offers, and how we help more people benefit from higher education. Another important finding from this year's survey, is that employers see academic and vocational qualifications as having equal stature. No coincidence then, that BTEC combined with A level is now the fastest growing route to university.'

An Apprenticeship Levy that works remains a key priority

Prior to the introduction of the levy, engagement with apprenticeships has been growing: 71% of businesses surveyed offer apprenticeship programmes (up from 66% in 2015).

• The business priority for the levy is to ensure firms can offer more, and better quality training places - not simply rebadged current training. To deliver this, the new system must be responsive to business need (71%) and give increased flexibility to spend levy funds (65%). Over half of businesses (57%) demand better clarity between the UK and the devolved nations as to how the system will work.
• The poor current levy design means that close to half of businesses expect the levy to cause increased prices or reduce margins (45%). Most pressingly, firms foresee having to make cuts to non-apprenticeship training (39%) and downward pressure on wages (22%) is likely, while 17% say they are likely to cut numbers to meet levy costs.
• The levy will impact business of all sizes. Nearly half of all medium-sized businesses (MSBs) believe they will have to absorb the levy as an additional tax - making no changes to their training profile - while over a third (35%) expect the levy will increase their prices or reduce their margins. The 3 million starts target will likely face further challenges too as a fifth of MSBs (20%) will decrease the number of apprenticeship places they offer and over one in ten (13%) expect to decrease the number of graduates they hire.
• A third of respondents (34%) will continue their current approach to training and apprenticeships and plan to absorb the cost as a tax, while over a third of firms (38%) say they are likely to offer more apprenticeships in the new system. It is not yet clear whether any growth in numbers will be new provision, or simply existing training that has been 'rebadged' to make it levy-fundable.

Josh Hardie, CBI Deputy Director-General, said:

'As it stands the levy system will work in Whitehall but it won't work in Walsall, or any other part of the UK where business is training and developing people.

'While the ambition is positive, the current design does not recognise the breadth of great training currently being delivered and runs the risk of unintended consequences, including fewer apprenticeship opportunities, downward pressure on wages or cut-backs on non-apprenticeship training

'Our survey shows how businesses develop and nurture talent and that's why their priority for the levy is flexibility: so companies can invest in what works.'

Business-education engagement continues to grow

• Business-school links have grown: over half (55%) of businesses have increased the scale of their involvement in schools or colleges this year. Four out of five (81%) respondents have at least some links with schools and/or colleges, with connections most widespread between businesses and secondary schools (70%) and FE colleges (66%).
• CBI is urging business to do more: this year the CBI partnered with the Royal Society to produce a toolkit for businesses with a step by step guide on engaging with schools. Across the business community there is a wide range of activity from teaching tools, supplying technical resources, encouraging or offering work experience.
• Businesses want to see schools up to age 14 helping young people develop general awareness of work through engagement with business (42%) and better careers advice (38%).

Rod Bristow, President of Pearson's UK business said:

'Employers don't just value what people know; they value what they can do. By far the most important 'skills factor' centres on attitudes and aptitudes such as ability to present well. The majority of employers have concerns in these areas, whereas less than a quarter worry about formal qualifications. These soft skills have hard outcomes.'

Businesses are looking to support schools to develop young people with the attitudes & aptitude for adult life - which they see as more important than qualifications

• The most important factor for employers when recruiting school and college leavers is their attitude to work (89%) followed by their aptitude for work (66%); these rank well ahead of formal qualifications (23%).
• One in five businesses also view business awareness and relevant work experience as among the top considerations when recruiting young people (20% and 21% respectively).
• Concern about support for young people: business doesn't believe existing careers support and experience is giving young people want they need. Around half of businesses are not satisfied with school leavers' work experience (56%) and their skills in communication (50%), analysis (50%) and self-management (48%). Addressing the careers deficit in many of our schools - in particular through the work of the Careers and Enterprise Company - will help with this, as these are shared issues, not ones for schools alone.
• Essential capabilities could improve: many businesses still report low levels of literacy and use of English (32%), basic numeracy (29%), and teamworking (26%).

Josh Hardie, CBI Deputy Director-General, said:

'Business cares deeply about our school systems. We see the success of UK education as a shared challenge for employers, government, schools and communities - so the increasingly high levels of engagement in the survey tell a good story.

'Moving from school to the world of work is one of the biggest steps any of us make, that's why business wants to do their bit to support schools and teachers to help develop the skills, character and attitudes students need to succeed in work and life.

'The system is slowly putting more emphasis on personal development but this must go further. Across the UK there are great examples of businesses supporting schools, teachers and students with practical help, expertise and ideas to inspire and inform career choices. To make this best practice the norm, not the exception, our education systems need to encourage schools to undertake this activity.'

The CBI/Pearson 2016 Education and Skills survey was carried out before the EU referendum.

The survey was conducted in April and May 2016, with responses received from nearly 500 organisations, collectively employing more than 3.2 million people. Participants ranged in size from firms with fewer than 50 employees to those with more than 5,000; SMEs accounted for nearly a third of respondents (31%). Respondents were drawn from all sectors of the economy, ranging from manufacturing (15%) and construction (10%) to the creative industries (6%) and professional services (10%)