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Cuts to skills funding hit poorest areas hardest and put £20 billion of economic growth at risk

Cuts to skills funding hit poorest areas hardest and put £20 billion of economic growth at risk

Millions of lost opportunities to improve qualifications are holding back economic growth and creating a “great skills divide” as a result of cuts to skills budgets, a new report warns.

By 2035, one in two adults will hold a higher education qualification. This would leave the UK 10th in the OECD, down from 6th in 2022, as other countries continue to expand higher education. The UK is also on track to make little progress in intermediate skills, leaving one in three adults qualified just to GCSE or equivalent level, behind many comparator countries.

Learning and Work Institute (L&W), the independent policy and research organisation behind the report, warns the UK’s skills base risks plateauing mid-table in the OECD at an estimated opportunity cost to the economy of £20 billion a year. The country’s chronic inability to meet demand for skills is a contributor to low economic growth over the past 15 years, with average wages now £12,000 per year below what they would be on pre-financial crisis trends.

The Government has cut investment in skills in England by £1 billion since 2010, while employers are investing 26% less in training per employee than in 2005. L&W’s new report shows these cuts have disproportionately affected people in the poorest areas and with the lowest qualifications. Government cuts have meant a 27% fall in publicly funded learners from the most deprived areas, while the number of learners from the most affluent areas have barely changed. Meanwhile, people qualified to degree level are three times more likely to get training at work than non-graduates.

UK adults have gained almost seven million fewer qualifications over the last decade than if attainment had stayed at 2010-11 levels. Nine million adults in England currently lack essential skills in literacy or numeracy. While the country’s overall qualifications profile is projected to improve by 2035, L&W estimates that the UK will have more than double the proportion of people with low qualifications than that of comparators like Ireland and France.                                 

Launching a year-long research project supported by the awarding bodies City and Guilds and NOCN, L&W calls for a higher ambition to boost social mobility and meet the rising and changing skills needs of the UK economy.

Stephen Evans, Chief Executive of L&W, said:

“Decades of underinvestment in skills by governments and employers means the UK is languishing in mid-table compared to other countries, with those in the poorest areas hit hardest by cuts in the last decade. Our research shows that won’t change on current trends. That’s bad news when you look at how our economy’s changing: there’s a rising tide of skills demand and we are barely keeping pace. A higher-skilled workforce is essential for improving economic growth, rising living standards and expanding opportunity. We need a higher ambition to secure a better, brighter future.”

Kirstie Donnelly, Chief Executive Officer of City & Guilds, said:

“Learning and Work Institute’s Ambition Skills programme rightly identifies the need for a new approach to learning and skills, which recognises the economic and social benefits of learning, and enables people at all levels of society to gain the skills they need to succeed.

Its new report makes a compelling case for greater investment in entry level and intermediate skills, both in terms of the improvements to productivity this will bring, and in averting a ‘skills divide’ which threatens to limit opportunities and impact living standards for future generations.”

Graham Hasting-Evans, Chief Executive of NOCN, said:

“Following many years of underinvestment in skills by government and employers, and in some cases failed investment, there are skills gaps – particularly at levels 2 and 3. This also means the UK’s workforce is ill prepared for a digital, AI and Net-Zero future, with a polarised structure in the economy of too much investment at degree level and limited spending on operational and technical skills. I welcome this report’s findings and trust that a new Parliament in 2025 will at last focus on ambitious investment in the skills needed to create an across-the-board productive, sustainable and fair economy for all the UK’s people.”

Sector Reaction

David Hughes, Chief Executive, Association of Colleges, said:

“This Learning and Work Institute report shines a light on how the long-term underinvestment in skills in the UK is inhibiting economic growth. Government investment has dropped significantly in the last 14 years at the same time as people are needing more opportunities to train and adapt to changing job needs and when employers are finding it increasingly difficult to find skilled applicants when they try to recruit. The report also highlights the low base of employer investment in workforce skills compared to our competitor countries. This was identified by the current government over a decade ago but under their stewardship it has got worse since then.

“With colleges reporting long waiting lists of adults who are wanting to retrain or upskill, we urgently need a boost in investment from government and for employers to step up too. Without investment in our FE colleges, the skills gaps employers are grappling with won’t be filled, we will let down a whole cohort of adults who are willing and wanting to return to education or training and economic growth will continue to be inhibited.”

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