More than two-thirds (68%) of UK employers have struggled to find skilled workers this year, with Brexit uncertainty making talent scarcer.

An annual report on the skills landscape of the UK, The Open University Business Barometer 2019, reveals that organisations spent £4.4 billion on temporary staff, recruitment fees and increased salaries in the past 12 months due to difficulties finding employees with the right qualifications and experience.

Nearly half (48%) hired temporary staff to plug gaps, while 44 per cent spent more than intended on recruitment fees.

Others (38%) took a different approach, increasing salaries in order to make roles more attractive, and nearly a third (31%) were forced to hire at a lower level than intended.

Approach to addressing the skills shortage

Expenditure 2019

Expenditure 2018

Percentage Change

Extra spending on recruitment fees

£1.6 billion

£1.2 billion

+33%

Training to boost skills of those hired at a lower level

£1.2 billion

£1.5 billion

-20%

Increasing salaries on offer

£0.9 billion

£2.2 billion

-59%

Spending on temporary staff while role remained vacant

£0.8 billion

£1.5 billion

-47%

Total

£4.4 billion

£6.3 billion

-30%

The skills shortage comes as the UK employment rate stands at the highest level since 1971, while unemployment is at its lowest since 19741. The dearth of skills in the labour market means that recruitment is taking one month and 27 days longer than anticipated, forcing many to seek external help – leading to a 33 per cent rise in spending on recruitment fees in total.

Three in five (63%) employers report that their organisation is currently facing a skills shortage (up from 62% in 2018). And while spending on recruiters is on the rise in an attempt to attract necessary skills, there is also a greater focus on re-training existing staff, with more than half (53%) of organisations increasing their training and development budgets in the past year – by an average of 10 per cent.

In the past, many employers have relied on buying talent rather than building it, but with more than three in five (62%) expecting it to become harder to find the right skills in the next year many are now looking internally.

Three in five (61%) think that they will have to focus on developing talent from within their organisation if they want to guarantee access to the skills they need in order to be productive and efficient. And the benefits of this approach can be felt throughout an organisation, with the Department for Business, Innovation and Skills citing training as one of the most commonly cited channels through which spillovers of knowledge and productivity can occur2.

While one in five (21%) employers think that Brexit will open up new growth opportunities for their organisation, the current uncertainty surrounding the UK’s departure from the EU may be a key driver of this sudden change in gear. Three in five (59%) senior business leaders agree that the skills shortage will worsen after the UK officially leaves the European Union, which may explain the shift to focus on home-grown talent.

While seven in 10 (71%) employers agree that developing the skills of the existing workforce is a more sustainable approach, it is crucial that any training helps to support business objectives, while offering as much as value as possible. The Open University’s flexible, technology-enabled degrees and apprenticeships, allow employees to fit learning around work and personal commitments, whilst being able to stay local and contribute to their community – and at the same time nearly three in five (58%) employers believe is less disruptive than other forms of training.

David Willett, Corporate Director at The Open University, responded to the findings: “It’s encouraging that employers are looking to invest in the talent of their existing workforce, with businesses increasingly turning to strategies that will serve their skills requirements for the years to come. While many are starting to focus more on building up skills from within, rather than buying them in, it is essential that training ultimately delivers results, while fitting around employees’ existing commitments.

“Current uncertainties may see businesses understandably focusing on the short term, but initiatives like work-based training are essential for those looking to remain agile and competitive throughout in a rapidly changing business environment. Training, such as apprenticeships, provides a long-term solution to UK organisations looking to adapt to challenges on the horizon such as Brexit, digitisation and new technologies.”

Further findings, including specific skills shortages by region and sector and employers’ expectations for the year ahead, as well as details of The Open University’s offering, are available in The Open University Business Barometer 2019.

Methodology: The Open University Business Barometer was developed using the expertise and experience of The Open University in conjunction with quantitative market research amongst a range of businesses across the UK. A full methodology, detailing all extrapolations and calculations, can be found on The Open University's business website.

The Open University commissioned PCP Research Limited to undertake a survey of 950 senior business leaders across the UK between 9 and 21 May 2019. The data was weighted by UK nation, region, business size and sector. Data for financial calculations was analysed and extrapolated by Third City.

About The Open University: The largest academic institution in the UK and a world leader in flexible distance learning. Since it began in 1969, the OU has taught more than 2 million students, and it currently has almost 175,000 current students, including more than 7,000 overseas.

Over 75% of students are in full-time or part-time employment, and 78 per cent of the FTSE 100 companies have sponsored staff to take OU courses. The OU has been delivering work-based learning to organisations since the mid-90s, and has an employer satisfaction rating of 98%, according to the Skills Funding Agency. The OU launched its higher and degree apprenticeships offering in 2016 to provide employers with flexible, technology-enabled apprenticeship training for new and existing staff in leadership and management, digital, policing, healthcare and nursing.

In the latest assessment exercise for university research (Research Excellence Framework, 2014), nearly three quarters (72%) of The Open University’s research was assessed as 4 or 3 star – the highest ratings available – and awarded to research that is world-leading or internationally excellent. The Open University is unique among UK universities in having both a strong social mission and demonstrating research excellence.

Regarded as the UK’s major e-learning institution, the OU is a world leader in developing technology to increase access to education on a global scale. Its vast ‘open content portfolio’ includes free study units, as well as games, videos and academic articles and has reached audiences of up to 9.8 million across a variety of online formats including OpenLearn, YouTube and iTunes U.

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