A radical new strategy for lifetime reskilling must be the bedrock of UK economic recovery - CBI

Last month, the CBI welcomed the Prime Minister’s Lifetime Skills Guarantee to help solve the urgent skills challenge facing the UK jobs market. Yet research carried out prior to the pandemic shows an urgent need to go further and faster to reskill the country’s workforce.

The UK faces a stark choice: invest more in lifetime learning and upskilling of millions of employees, or stick to business as usual, and risk sustained higher rates of unemployment and skills shortages.

The CBI’s report Learning for life: funding world class adult education, based on analysis by McKinsey & Company, shows that nine in ten employees will need to reskill by 2030 at an additional cost of £13 billion a year.

New technologies and the changing nature of our economy are transforming the skills needed for many jobs, while other roles are being lost entirely.

As Covid-19 accelerates changes to the world of work, the UK should use this momentum to drive a national reskilling effort to futureproof livelihoods and power UK competitiveness.

The CBI’s analysis also shows that failure to invest will harm the livelihoods of the most disadvantaged. Participation in training by those in lower-skilled jobs which are most at risk of automation is 40% lower than that for higher-skilled workers, while half of those in the lowest socioeconomic group in the UK have received no training since leaving school. Regions with historically sluggish employment growth are likely to face the most negative employment impacts from automation.

The UK’s mission to invest in training is therefore not just about the economy, but also about tackling wide inequalities, and a key part of the government’s goal to level up across the country.

Learning for life’s recommendations include:

• Evolve the Apprenticeship Levy into a flexible Skills and Training Levy to unlock business investment in high-quality accredited training.
• Introduce training tax credits for SMEs to overcome longstanding barriers of capacity and resource in smaller businesses.
• Launch Career Development Accounts to support unemployed people and individuals with the biggest retraining needs.
• Transform Job Centres into one-stop ‘Jobs and Skills Hubs’ to support workers looking to retrain.
• Extend the lifelong learning loan allowance to adults of all ages and use it to drive increased availability of bite-size, flexible and online learning.

The pandemic can be a catalyst for action. Many employees are not working at full capacity as firms face weak demand. This time can be used for training, and many employers are already offering this opportunity. But more scale is needed and we recommend that business, unions, education providers and government work together to ensure spare time is productively used. The difference for our economy and employees could be transformational.

Dame Carolyn Fairbairn, CBI Director-General, said:
“Ensuring people can adapt to the changing world of work will be one of the most important missions this country embarks on in the next decade. The economic impact of Covid-19 makes starting now only more urgent.

“Jobs were already changing with nine out of ten employees needing to reskill over the next decade. The pandemic has accelerated the need to act now.

“The right skills strategy can help every worker to progress their careers, drive up living standards and level-up the country. But a failure to act will leave businesses facing skills shortages and workers facing long-term unemployment. We are at a fork in the road that requires urgent and decisive action.

“The recently announced Lifetime Skills Guarantee is an important step in the right direction, but it is only a start. The government has long promised meaningful reform of the Apprenticeship Levy but has not delivered it. Meanwhile the number of apprenticeships continues to fall. It is time to end this failed experiment.

“Replacing the Apprenticeship Levy with a Flexible Skills and Training Levy and a training tax credit for SMEs would encourage every firm to invest more in the skills that are essential to the long-term success of their company and workforce.”

“And let’s not waste time during this pandemic. The CBI wants to work with unions, education providers and government to ensure that employees working fewer hours have as much opportunity as possible to retrain and reskill.”

The skills our economy needs over the next decade

The CBI report sheds new light on how changes in the economy, fuelled by digitisation and automation, will dramatically change the skills sought by employers. These changes include:

• 21 million people will need basic digital skills
• 16 million will need critical thinking and information processing skills
• 15 million will need skills in leadership and management
• 14 million will need interpersonal and advanced communication skills; and
• 9 million will need to build on their STEM knowledge

Tera Allas, McKinsey & Company Research and Economics Director, said:

“Technology-driven change is set to transform our economy and society. The emergence and spread of COVID-19 is accelerating many of these trends, and some industries have changed more in the past few months than they had in the past few years.

“For those in work today, 90% are expected to require significantly different skill sets by 2030, driven by the changing number of jobs, with occupations such as care workers likely to increase while others, such as machine operatives, likely to decrease. The skills transformation is also driven by changing skills requirements within jobs, such as salespeople needing to have better digital skills.

“Investing in the UK’s human capital by boosting the skills of our workforce offers a huge opportunity: boosting productivity, improving job satisfaction, and enhancing livelihoods for workers. Achieving this will need a significant shift in current approaches to adult education and to skills investment.

“None of the key groups that need to take action – business, government, the education sector, and workers – can do this alone. To capture the future skills opportunity, we need the partnership of the century.”

The research was carried out prior to the coronavirus pandemic, with analysis done by McKinsey & Company.

The figure of nine in ten workers was calculated based on modelling showing that by 2030, over 30 million people – equivalent to 90% of the current workforce - would need to be reskilled.

The data gathered before Covid-19 indicates that businesses, government and individuals already needed to spend an additional £130 billion over ten years (£13 billion a year) on adult education, a 25% increase on current expenditure. If firms continue to invest in training at the same rate as they do now, this could increase their investment in training by £3.6 billion per year. However, this would still leave a £9.5 billion per year gap, a figure which is now likely to be larger following the pandemic.

Costings

• £13 billion a year is the equivalent of an additional £430 per employee annually.
• Flexible Skills Levy - £0.48 billion
• Career Development Accounts - No more than £3.9 billion

Definitions

• Retraining is the process of learning a new vocation or skillset.
• Upskilling refers to the refresh or development of skills to keep up to date with technological and business developments.
• Reskilling is the process of updating skills through retraining or upskilling.
• Basic digital skills include using computers to carry out tasks such as operating applications and sending e-mail.
• Interpersonal and advanced communication skills include empathy as well as complex communication or negotiation skills.
• STEM knowledge includes advanced data analysis, mathematical, IT and programming skills, technology design, engineering and scientific research.

Source - McKinsey UK Skills Mismatch (2019)