Dated: 14 December 2010

In its latest skills survey, the Institute of Directors (IoD) reveals that the growth of nearly 60 per cent of businesses is being held back by a lack of skills in the wider workforce and among existing employees. The IoD calls on the Government to improve the overall business environment by scaling back business taxes and employment regulation, including the misguided Time to Train policy, so that firms have more resources to invest in training.

Commenting on the survey results (full details below), Miles Templeman, Director-General of the IoD, said:

“It is disturbing that at a time of economic weakness, the growth of the private sector is being held back by skills shortages. Businesses want to invest in training and are doing so on a large scale already, but they would invest even more if the Government took some radical steps to deliver a better overall business environment.

“Excessive employment regulation and an uncompetitive tax system effectively eat up resources that businesses could use to fund training. The Government needs to put more emphasis on sorting out these problems if it wants to tackle skills shortages. The biggest barrier to greater employer investment in training is a lack of resource, not a lack of law.”

Survey Results

Skills Shortages

• 31 per cent of employers were struggling to fill vacancies in their workforce. This was primarily due to a shortage of applicants with the required skills: 74 per cent of those with hard-to-fill vacancies blamed a lack of candidates with the appropriate skills, qualifications or experience. The hardest skills to source have been technical skills, management and leadership skills, and customer service skills.

• Overall, therefore, 23 per cent of IoD members’ organisations surveyed had so-called ‘skills shortage vacancies’: vacancies proving hard to fill because of a lack of skilled applicants.

Skills Gaps

• Even more significant than skills-related recruitment difficulties are skills weaknesses in organisations’ existing workforces – so-called skills gaps. 47 per cent of the directors surveyed said that some of their organisation’s employees lacked the skills needed to do their job to the required level.

• On average, organisations reporting skills gaps estimated that 24 per cent of their employees lacked the skills they required. Organisations affected by skills gaps identified management skills and leadership skills as being in particular need of improvement.

Business Impact

• Employee skills gaps are wreaking considerable damage on businesses. 58 per cent of employers reported that skills gaps were holding back the growth of their firms. This damage also comes in the form of higher operational costs (reported 32 per cent of employers), compromised quality (34 per cent), lost orders (25 per cent), stifled innovation (33 per cent) and increased workloads for other employees (61 per cent).

Training

• IoD members’ organisations have an impressive training record with 94 per cent investing in training. Denouncing employers’ failure to train, and pronouncing their consequent culpability for the nation’s skills problems, are both familiar refrains. It would be tempting to assume, given the severity of the skills problems described above, that businesses have a training blind spot. In reality, the survey evidence shows the reverse is true. This is not surprising: skills shortages and skills gaps can serve as a significant spur to train.

• During the recession employers have maintained a robust commitment to training, debunking the myth that the training budget is always ‘the first to be cut’ in a downturn. Assessing the impact of the recession: 72 per cent of those organisations providing training said expenditure on training per employee had either stayed the same (52 per cent) or increased (20 per cent). 22 per cent said it had decreased.

The full survey can be viewed at this link: Skills Crunch