Government’s industrial strategy falls short of addressing skills shortage, say experts

Policy paper ‘too exclusive’ to tackle key employment factors following dire economic forecast

The government’s industrial strategy white paper, released amid great fanfare as a way to aid workplace productivity and boost the earning potential of British workers, lacks sufficient measures to deal with the country’s skills and training gap, experts have said.

Business secretary Greg Clark hailed the paper, Industrial Strategy: building a Britain fit for the future, as an answer to Britain's productivity "weakness". National workplace efficiency had plummeted compared to other European countries, and the figures may worsen after Britain exits the EU, he said as it was released on Monday.

But many industry leaders expressed concerns that it falls short of dealing with the UK’s skills shortage and earning levels, after last week’s budget revealed a dire productivity forecast.

The Department for Business, Energy and Industrial Strategy’s key measure is a new National Retraining Scheme that supports people to reskill, a £64m investment in digital and construction training, and a £406m fund for maths, digital and technical education.

Following the focus of a government green paper on four potential economic growth areas – people, infrastructure, business environment and places – the strategy launched sector deals between government and industry to increase productivity in life sciences, construction, artificial intelligence and the automotive sector.

Ben Willmott, head of public policy at the CIPD, said the government was right to set the goal of creating a modern industrial strategy to help businesses create high-quality, well-paid jobs nationwide.

But he said its level of investment and ambition – particularly relating to skills and how they are used in the workplace – was inadequate given the UK’s productivity challenge.

The plans set were “too exclusive to have the impact required” as sector deals focused on important but narrow high-tech and construction sectors that together account for less than 15 per cent of UK employment, he said.

"On skills, there is nothing in the strategy that addresses the UK’s chronic underinvestment in adult skills and lifelong learning, with the focus mainly on education policy and the supply of skilled labour for the future in niche sectors,” said Willmott.

The National Retraining Scheme seemed primarily focused on the use of educational technology for students in two small sectors, he added.

The CIPD supports plans to reform technical education, but asks that the government “urgently reviews how the apprenticeship levy is operating, to make it more flexible and responsive to employers’ skills needs, given the recent big fall in apprenticeship starts”, Wilmott said.

“At a regional level, we need to see much more investment being directed to local skills challenges,” particularly for SMEs to boost management capability, which he hoped would receive greater focus in the government’s SME productivity review.

Mike Taylor, managing director at consultancy Accelerating Experience, said a focus on building technical skills among employees was much-needed but “a glaring omission [of] commitment to solving the UK’s leadership crisis” was “holding back the performance of UK plc.

“Leading a business is self-evidently a core value-generating skill in its own right, and failure to develop this at board level is leading to micro-management and a lack of strategic planning, both of which hamper productivity.”

The paper went some way towards supporting the ambition of ‘good work’ outlined in Matthew Taylor’s review of modern employment, according to Carolyn Brown, employment partner and head of RSM Legal.  

The ‘good work’ principle was discussed by Taylor and RSM experts at a recent event, in which Taylor argued strongly that greater workforce engagement, led by HR, can encourage higher levels of customer satisfaction and retention.

The government responded to the Taylor review’s recommendation that the business secretary must be held to account for the quality of work, by announcing that he will take on promotion of “the delivery of better-quality jobs in the British economy”.

It also accepted the review’s idea that a set of measures to assess job quality and success against must be identified, Brown added. The government will begin a dialogue with stakeholders in business and the unions to develop a common set of principles and measures, including good pay, participation and progression, voice and autonomy, wellbeing, safety and security and overall worker satisfaction.

Steps will also be taken to make flexible working a reality for all British employees and there will be support for the publication of BME pay and bonus gaps, driving progression for BME talent, Brown said.

The government is due to formally respond to the Taylor review at the turn of the year.

Ian Brinkley, CIPD acting chief economist, said the budget’s industrial strategy had missed an opportunity to make “bold, meaningful investment in skills that will boost the UK’s productivity growth and the outlook for living standards”.

In light of the “grim reading” of the new OBR figures on growth and productivity, the measures announced did not seem to meet the scale of the challenge the country faced, he said.

“If the government wants to build an economy that is 'fit for the future' then we need a much greater investment in the skills agenda, including how skills are used in the workplace. The CIPD believes that at least 5 per cent of the National Productivity Investment Fund should be allocated to boosting investment in skills, particularly for lifelong learning.

Mike Cherry, the Federation of Small Businesses’ (FSB) national chairman, said the paper marked the “first phase of the journey to improve the UK’s productivity”, for wage and living standards growth.

It was essential that “we quickly move onto phase two”. For a sustained and game-changing impact on the economy, the focus needed to be on how to improve productivity across the UK’s 5.5 million small businesses and the self-employed, he said.

The FSB welcomed the reinforcement of commitments to skills training and physical and digital infrastructure, but wanted local partnerships to build their industrial strategies around a full picture of their local economies.