Skills gap stifles UK’s global ambitions

Money talks. And if the government is serious about turning the UK into a high-skilled economy, companies should be forced to report to investors on the training they provide for staff.

That was the message from Chris Humphries, chief executive of the UK’s biggest provider of vocational training, City and Guilds, in an address to MPs on the Parliamentary Committee on Skills.

Humphries was giving his response to the Leitch Report, which last year set out in stark terms the enormous task ahead if the UK economy was to compete in a global market.

Leitch revealed that more than one-third of adults of working age in the UK do not have a basic school-leaving qualification, and five million adults have no qualifications at all.

Words and numbers

The report also showed that one in six adults does not have the literacy skills expected of an 11-year-old, while half do not have equivalent levels of functional numeracy.

It concluded that UK skills levels will continue to compare poorly in an increasingly globalised market, and that there was a risk this would undermine the UK’s long-term prosperity.

Humphries told the committee that this meant UK businesses needed to change their perception of training from being a cost to being an asset.

“Assets are protected and their value maximised, costs are cut and are seen as a necessary evil,” he said.

This could mean making companies act through regulation, he said, and cited US research which found that if company reporting requirements included a section on skills, it would cause an increasing number of institutional investors to choose companies that invested in training their staff.

This research, by Bassi Investments, found that investors in the 500 largest companies in the US received a 52% higher return over five years from shares in organisations that made a big financial commitment to training.

Attracting investment

A separate global survey by KPMG found that availability of skilled labour was the strongest factor in attracting global inward investment.

“There is a strong correlation between systematic investor demand and company behaviour – if investment increased and share value and profitability rose from training investment, companies would start investing more in training and ensure they got full value from that investment,” Humphries said.

He called on the Treasury to work with business organisations and the Sector Skills Councils to investigate the options for new reporting standards, tax schemes and incentives that would make skills key assets to investors.

The closest the government has come in recent times to creating such a reporting standard was the Operating and Financial Reviews (OFRs), which were criticised for limited people reporting measures and then withdrawn by chancellor Gordon Brown anyway.

“I’m not sure Gordon Brown did the OFRs correctly,” Humphries told Personnel Today. “To make this work, we need to talk to institutional shareholders rather than inventing regulations in Whitehall.”

But Humphries believes global pressures could force the government in to a rethink over reporting on skills. “Things that are considered impractical in one environment can quickly become acceptable in a different climate,” he said.

10 steps to allow the UK to compete in a global economy

1. Individuals, the government and employers all have to realise they have a role to play in upskilling.
   
2. There should be a clear policy on how public funding on education is spent – the state should prioritise skills needs.
   
3. Education should be re-assessed – the Tomlinson proposals to abolish GCSEs and A-levels should be fully implemented.
   
4. Create more Sector Skills Councils (SSCs) to cover every industry and more effort to engage industry in their work.
   
5. SSCs to target small firms by working in geographical ‘clusters’, bringing together organisations through working partnerships.
   
6. The UK should look into measuring the impact of training on productivity, and consider new company reporting standards that make employers detail the training they offer to staff.
   
7. The UK needs a much more effective, well-informed and professional careers information service.
   
8. Provide the opportunity and funding for all under-25s to attain Level 3 education.
   
9. Skilled craftsmen, technicians and trades people to be fully regulated in the same way as the ‘professional’ classes.
   
10. Create individual learning accounts that would give people credits to pay for education as and when required.

To find out how staff training helped the Portman Building Society build sales, click here.