Lack of skills costing business £10bn a year

2005

Skills gaps cost England £10bn a year, and many employers are still reluctant to spend money on employment-related education and skills training, a government watchdog has concluded.

The report by the National Audit Office has called for how employers get advice and information to be simplified.

It has also demanded a greater emphasis on flexible and affordable training and suggested funding be tailored to encourage more employers to invest in training to meet skills shortages and regional priorities.

Sector Skills Councils should be helped to develop as genuinely employer-led bodies, leading on incorporating employers' perspectives into skills development, the NAO said.

Despite spending by employers in both public and private sectors estimated at £23.7bn on education and training, 6 per cent of employers had skill shortage vacancies, it estimated.

Nearly a quarter – 20 per cent – had skills gaps, costing in total some £10bn a year in lost revenue or £165,000 a year in a typical business with 50 employees, it added.

On average, an 8 per cent increase in the proportion of trained workers could lead to a 0.6 per cent increase in UK productivity, as measured by the value added per hour worked, it added.

Employers wanted their employees to be literate and numerate, but were often reluctant to fund or release employees for basic skills (level 2) training, especially when most people might be expected to become proficient in literacy and numeracy before they leave school.

Employers generally acknowledged the economic benefits from training and skills development at level 3 and above and expected to have to bear at least a proportion of the costs.

But they also wanted more incentives to train their staff. For employers wishing to influence skills training, the biggest barrier was shortage of time.

NAO chief Sir John Bourn said: "A more skilled workforce is vital for national productivity and the delivery of public services. Better skills are also important for the country to maintain its position in an increasingly competitive global economy.

"The doubts that some employers have about the value of skills training must be addressed by more streamlined communication with employers, by developing flexible and affordable training genuinely targeted on business needs, through incentives to employers, and effective channels through which employers can influence skills training," he added.