Fewer firms increasing investment in training as shortages, inflation and recession weigh heavily despite widening skills gap – CBI Education & Skills survey

Employers are keen to engage in training but there is a lack of awareness of skills reform programmes.

Fewer respondent firms are increasing their investment in training and development after a year of post-pandemic catch-up growth last year, while a majority of respondents say they are unaware of some key Government skills reform programmes according to the 2022 CBI Education and Skills Survey.

The survey, completed by 273 businesses of all sizes and sectors across the UK, revealed:

• The proportion of firms intending to increase investment in training and development over the next year has fallen (38% compared with 53% in 2021).
• But 47% of business respondents said they were planning to maintain investment in training and development, compared with 43% in 2021.
• There was a widespread lack of awareness of key Government skills reform programmes. 4 in 5 of respondents said they were unaware of plans to introduce the Lifelong Loan Entitlement (LLE). There were similar responses from respondents for awareness of Local Skills Improvement Plans (LSIPS) - 82% were either only slightly aware or not aware - and 65% were only slightly aware or had no awareness of the Government’s flagship T Level initiative.
• Of the firms that do not offer apprenticeships, the key reasons for not doing so were identified as the lack of compatibility between current apprenticeship standards and skill needs (42%), the complexity of administration (27%) and greater relevance of other forms of training (24%).
• Three quarters of respondent firms were supportive of extending the Apprenticeship Levy funding to cover other forms of regulated or accredited training (75%).

The CBI Education and Skills Survey took place against a backdrop of labour and skills shortages, a decline in business investment and the cost-of-living crisis. The CBI's own economic forecast shows the UK is facing a shallow but prolonged recession in 2023, with business investment standing 9% below its pre-COVID level by the end of 2024. Results from the CBI’s Employment Trends Survey 2022, in partnership with Pertemps, outlined that access to labour and skills continues to top business’ labour market concerns, while the cost of living and high labour costs also feature heavily.

Despite economic uncertainty, 75% of businesses are planning to maintain or expand their apprenticeship offer over the next twelve months relative to twelve months ago, compared to 72% in 2021. However, there has been a drop in the number of businesses looking to expand their plans for apprenticeship delivery across the same period, from 43% in 2021 to 34% in 2022. Finding a provider that can deliver a relevant course has become significantly more difficult amidst shortages and high inflation, with 48%* stating that this would make the apprenticeship system more effective, compared to 29%* last year.

Matthew Percival, Programme Director for Skills & Inclusion at the CBI, said:

“Businesses and Government need to be pulling every lever to tackle the labour shortages that are holding back growth and putting business investment at risk. Skills is a critical component, alongside tackling economic inactivity and boosting productivity through innovation and adopting technology.

“Increasing business investment in skills is important and possible, but will require Government and businesses to work together to remove the barriers that stand in the way. For example, by remodelling the Apprenticeship Levy into a Skills Challenge Fund – a measure strongly supported by the business community – we can boost employer skills investment and business performance, while supporting the Government’s skills reforms.”

Robert West, Head of Education and Skills at the CBI, said:

“Despite a challenging year, employers continue to value skills and while most firms are planning to increase or maintain investment in training and development over the next 12 months, increasing the number of businesses scaling-up their skills investment is one of the levers that will help address chronic skills shortages.

“Our survey also highlights concerningly low levels of awareness for key aspects of the government’s skills agenda including T Levels and Local Skills Improvement Plans. To fulfil the government’s ambition of placing employers at the heart of the skills system, businesses and government must work together to highlight the positive case for engagement in the education and skills system – from retaining existing staff, to attracting young and economically inactive people into the talent pipeline.

“The CBI will continue to champion firms who grasp opportunities to develop their people and grow their business through skills investment. On the side of government, more can be done to remove barriers to investment through a more flexible approach which supports businesses to respond to the needs of the current and future economy and provide agile training and upskilling for people in or (re-) entering the workforce.”