The skills gap is a puzzle with lots of good solutions

Businesses have a lot to grapple with at the moment from the ramifications of the budget, to the opportunities (and threats) posed by artificial intelligence, to second-guessing trade policies of the US president-elect, Donald Trump. While these undoubtedly important issues dominate the headlines, another longstanding conundrum hangs like a cloud over UK plc: getting access to enough skilled labour.
The skills gap in the UK remains stubbornly high across sectors, regions and nations, according to the Open University Business Barometer published in the summer. It found that nearly two thirds of organisations are facing skills shortages. The Federation of Small Businesses calls this a barrier to growth for many firms.
This has not gone unnoticed in Westminster. Labour’s election manifesto promised to create a new body, Skills England, to boost skills for growth sectors. Yet it later emerged that this is set to be an “executive agency” within the Department for Education, with little power to consult employers.
BAE Systems is not waiting around to see how this works out. The defence company is recruiting for more than 2,400 new apprentices, undergraduate and graduate roles in 2025, which will result in a record 6,500 in training at the firm, making up about 15 per cent of its UK workforce. Among them, 1,100 graduates and undergraduates will “earn while they learn” on advanced technology programmes including the Global Combat Air Programme.
After a period of strong growth, BAE Systems has the money to throw at the skills needed for our military programmes — a cool £1 billion since 2020. Funds aside, the company’s approach, which involves working closely with universities, is to be applauded.
Smaller businesses without the firepower of the defence giant are coming up with innovative solutions. I recently met someone from a Thirsk-based firm called Power Plastics which makes sheeting for the Ministry of Defence among others. He was proud to tell me that the company has had a five-year partnership with HMP Kirklevington Grange in North Yorkshire. In this time it has employed more than 75 prisoners, giving them a chance to develop skills while serving their sentences. The programme also makes for a more inclusive workforce and reduces reoffending.
“We believe in the power of second chances,” explained Andy Beetles, managing director at Power Plastics, which has kept on several former prisoners after their release.
So, two very different approaches from the business world to bridging the skills gap.
The Federation of Small Businesses has several recommendations of its own. Its policy chair Tina McKenzie told me: “We need to see a strong commitment from government to help train and upskill the labour market, including setting a target to increase small business apprenticeships, increasing the corporation tax relief for employers training their staff, expanding skills boot camps in response to short-term skills challenges, and providing vouchers to small employers to develop a training plan or a workforce development strategy.”
Much like the UK’s productivity puzzle, sometimes likened to a 1,000-piece jigsaw puzzle, there is unlikely to be a one-size-fits-all solution to improving skills. One final thought: ultimately, finding enough of the right skilled workers may come down to raising wages, according to a construction boss I spoke to. If you thought your builder was expensive now…
The energy industry often gives me a sense of déjà vu, most recently with some news about the Rough gas storage facility, the largest in Britain. Last week it injected supplies into the energy system as we hit a cold snap just as unusually calm weather meant less wind power was being generated.
I remember when Rough, which is located about 18 miles off the Yorkshire coast, caught fire in 2006, hot on the heels of a gas dispute between Russia and Ukraine which had threatened to cut off supplies to many EU countries. Energy security suddenly shot up the UK political agenda.
A refurbished Rough now holds about 44 per cent of the UK’s gas storage reserves. Its continuing role in keeping us warm, and relatively cheaply, surely underscores the need for Britain to have a good energy mix amid the push to net zero. The need for such a mix was equally true in 2006 when Rough was burning.
Nuclear power also has a role to play in that mix, given the intermittent nature of some other supplies and the need for decarbonisation. The UK has nine reactors providing about 14 per cent of the country’s electricity. Yet of the current fleet, only Sizewell B is due to still be online after 2028 and Hinkley Point C, already long delayed, will be operational after that. Sensibly, the operators of Sizewell B want to extend the life of the plant, capable of powering two million homes, by another 20 years.
But it is not enough. The UK, home to the world’s first commercial nuclear power plant, risks being left behind as atomic energy experiences a renaissance in other countries including the United States. We need to set out a clear, long-term plan for new nuclear projects of all types so that they are sensibly regulated and delivered at pace.
Let’s hope it doesn’t take another explosion in the industry or international dispute for ministers to have their lightbulb moment.
Could Thames Water be heading for a break-up? The indebted water company now has a chief restructuring officer as it races to recapitalise its balance sheet. The idea of splitting it into two or more entities has been floated before, with the idea that London be served separately to the Thames Valley. But first the utility has to persuade creditors to turn on the taps in coming weeks. The story of Thames’s troubles has long been a slow drip, drip, drip of information and that looks set to continue.