Table of Contents
Summary
A better UK skills policy is essential for higher growth. Currently, there are significant skills gaps across various industries in the UK and attainment rates for non-academic education and training opportunities are about half that of peer countries.
Emerging sectors, such as clean energy and AI, have the potential to create quality jobs, but without improved workforce development and broader access, these opportunities could worsen economic and regional inequalities.
The UK's current skills policy is hampered by limited data on gaps and poor coordination of retraining. As a result, skills programmes are disparate and the government has failed to proactively respond to new shortages.
An enhanced Skills England can tackle these problems by coordinating the government’s approach to skills across departments. It should start by developing a UK-specific skills data system to improve the government’s capacity for analysing skills gaps.
The Challenge
At the launch of Skills England, the prime minister described Britain’s skills system as “a mess”. Deep-rooted inequalities in skills distribution across geography, class, and education are severely limiting workers' employment opportunities and contributing to economic stagnation. Large skills gaps exist across key industries like healthcare, education, construction, and hospitality.
UK attainment rates for non-academic educational and training opportunities are roughly half those of similar economies. A shortage of intermediate-level skills, in particular, is a major barrier to productivity growth across different sectors. Alarmingly, upskilling efforts are regressing: the number of training days (one of the main avenues through which workers gain new skills) provided by employers fell by nearly 20% between 2011 and 2017, reflecting a broader decline in further education and skills achievements across the UK.
Outside of London, low levels of upskilling stifle productivity, exacerbate regional inequalities, and prevent economic mobility for individuals from disadvantaged backgrounds (Table 1). An improved skills policy could reverse stagnation and foster higher growth.
Table 1. Participation and Achievement in Formal Education and Training programmes (per 1000 people)
Author’s analysis of Department for Education headline participation and achievement of education and skills by region, 2023/24. Adjusted using ONS Mid-2022 UK Population Estimates.
The UK’s attempts to combat these problems have been hampered by (1) insufficient skills data, (2) disparate and generic reskilling opportunities, and (3) a lack of ambition to meet workers’ skills needs in a rapidly changing economy:
Problem 1. Limited data exist for UK government bodies, researchers, and workforce practitioners to analyse skills gaps between occupations and workers
The UK’s existing skills strategy is hampered by insufficient data on the demand for skills across occupations and industries, the supply of skills among workers, and which work activities exemplify these skills. These deficiencies are further exacerbated by the absence of localised data relevant to regional labour markets.
The Department for Education’s (DfE) Unit for Future Skills has started developing a UK-specific skills taxonomy, but progress has been slow. While this effort could improve our understanding of current and future skills demands at a sub-national level, there are concerns that it may focus only on formal qualifications, overlooking the specific tasks and cognitive or physical abilities (e.g., mathematical reasoning, arm-hand steadiness, inductive reasoning) required for different occupations. Innovative data-driven initiatives could further provide more detailed and timely information on the demand for skills across the economy.
To be truly effective, data collection must capture timely and detailed information about the supply of skills. Without this, government efforts to improve retraining and address skills gaps will remain inadequate. This issue has persisted since the time of the Skills and Productivity Board, and the Unit for Future Skills has yet to commit to resolving it.
Problem 2. Existing skills services are disparate and unspecialised for workers seeking opportunities
A number of resources and programmes exist for those seeking new employment (see FAQs for a list). However, none of these is tailored to workers’ current or previous roles, let alone the tasks undertaken in such employment.
The services that provide information about and access to retraining opportunities are fragmented, making it difficult for workers to navigate their options. Additionally, few of these services offer industry-recognized qualifications, leaving workers without tangible proof of their newly acquired skills for potential employers.
Problem 3. Government efforts to mend skills shortfalls are reactive and limited
Current government skills services primarily focus on individuals who are actively seeking new opportunities. No government body is tasked with proactively addressing the needs of workers in declining industries or occupations to pre-empt their future skills needs.
There is a lack of coordination and oversight in workforce development efforts. Unions, government agencies, workforce development providers, universities, and businesses are not working together effectively, leading to inefficiencies in reskilling initiatives.
A more strategic approach could account for industrial composition, identifying overlapping skills between shrinking and growing industries. This would enable institutions and individuals to pursue more targeted and efficient reskilling.
The Opportunity
The launch of Skills England presents an opportunity to bridge existing skills gaps and align the post-16 skills system with the government’s industrial strategy to drive economic growth. In its initial phase, Skills England, under an interim chair, will begin assessing future skills needs to better prepare the workforce.
Growth in different sectors of the economy will profoundly affect the labour market. Currently, the highest performing and fastest growing industries (such as the creative, finance and business, and life sciences industries) are also the ones that require more advanced skill sets, particularly in analytical and personal skills. Consequently, university graduates are overrepresented in these industries. The UK also has relatively few workers qualified at sub-degree levels (Levels 4 and 5) than it should given the sectoral makeup of its economy. Both facts signal that the existing distribution of skills in the workforce is holding back economic growth.
The green transition offers a significant opportunity for investment and job creation, but this potential can only be realised if workers possess the necessary skills. With the exception of the North East, regions with the lowest share of green jobs (Northern Ireland, Wales, West Midlands, and Scotland; Figure. 1) also have the lowest proportion of workers with a tenure of less than two years (Figure 2.). This suggests that these regions are less equipped to transition workers into new green roles, making it difficult for green industrial growth alone to reduce regional inequality.
Aligning the skills of workers in declining industries with the demands of growing sectors could lead to a more equitable industrial transition. The UK can learn from West Germany’s successful transition from coal by implementing a skills-conscious industrial policy. As the economy becomes greener, many workers involved in oil and gas sectors face losing their jobs. Yet 93% of occupations within these sectors have measurable skills and competencies that are relatively easy to retrain to suit greener occupations. A better skills strategy could place the UK in prime position to take advantage of these new industrial opportunities.
Figure 1. Regional Differences Exist in Share of Jobs that Are Green, Green jobs as a share of total jobs per region, 2023
Author’s analysis of ONS Quarterly Labour Force Survey and O*NET data.
Figure 2. Insufficient Skills Policy Has Contributed to Inconsistent Green Job Growth, Green job inflows as a share of total green jobs per region, 2021-2023
Author’s analysis of ONS Quarterly Labour Force Survey and O*NET data.
Plan of Action
In order to maximise Britain’s skills opportunities, the government should task Skills England, the body set to coordinate skills policy across government, with the following responsibilities:
Develop a skills taxonomy akin to O*NET or the European classification of Skills, Competences, and Occupations for recording, systematising, and publicising the list of occupations by skills and abilities, not simply formal qualifications.
Identify skills gaps by occupation and industry, building a comprehensive, consistent, and timely system determining skills shortages across the UK.
Continue the existing data collection work of the Unit for Future Skills, tasking its team to pinpoint skills supply based on areas’ occupational distributions, in accordance with the new skills taxonomy.
Incorporate web-based big data to promptly identify changes in the demand for skills across industries and areas.
Forecast future skills needs across the economy based on existing trends in industrial composition, private investment patterns, new industrial strategy, and technological advancement.
Proactively coordinate the workforce development efforts of government agencies, workforce practitioners, unions, and businesses, in partnership with devolved administrations, to mend skills gaps.
Direct workforce development bodies to the industries and areas set to have the greatest skills needs in the future, informed by improved data on the demand for skills. This will help practitioners preemptively mend skills gaps before industrial change impacts employment.
Create one publicly-accessible resource for all UK government skills services, tailoring this tool to users’ needs with new occupational and skills-based data. These should most efficiently guide workers towards the most appropriate opportunities given their employment history.
Make recommendations to the Department for Education on how school curricula, university funding, and technical training can respond to existing and growing skills needs.
Propose a set of comprehensive online upskilling opportunities designed to most efficiently retrain workers based on (1) their existing skills and competencies; and (2) the skills and competencies of growing industries. And secure industry approval for the range of qualifications administered at the conclusion of these, as with existing Skills Bootcamps.
Make all of these opportunities eligible for retraining loans provided through the Lifelong Learning Entitlement.
Encourage industry buy-in to growing sectors by partially funding upskilling opportunities through business investment in addition to a new Growth and Skills Levy. Consider additional tax credits to the current tax-deductible incentives provided to businesses that engage in re-skilling. The benefits to growth of such investments would ensure that they pay for themselves.
Extend these tax benefits to those who self-fund their training, allowing more individuals, including the self-employed, to take up these opportunities.
Allow workers to take advantage of training opportunities from outside their current employer. Labour has already announced plans to widen the eligibility of the apprenticeship levy to allow businesses to provide other forms of training and re-skilling opportunities. Further regulations should ensure that these funding incentives can benefit a wider community of workers, particularly where training opportunities provide specific skills lessons and/or are based on specific existing skills profiles.
Initiate and co-ordinate a scheme of future earnings agreements whereby companies could invest in workers taking on upskilling opportunities. Such a scheme would encourage private investment above and beyond the inherent incentives in private-sector workforce development.
Budget
Opposition policy costings estimate that Skills England will cost £10mn per year with 100 full-time staff. A comparable organisation to this larger body is the Office for Life Sciences, founded in 2009, which has roughly 100 FTE employees and an estimated annual budget of £10mn. The Office for Life Sciences is responsible for producing two major datasets that support policymaking and is an example of successful cross-departmental coordination. The Unit for Future Skills, which should be absorbed into Skills England as part of the more ambitious approach detailed here, has a staff of around 20 full-time employees at a cost of just under £2.5mn a year. A £10 million budget for 100 FTE seems reasonable.
FAQs
What services currently exist for workers looking to learn new skills?
The government offers limited re-skilling opportunities for workers, with few comprehensive programs available. One such program is The Skills Toolkit, which provides short courses ranging from four to 48 hours. However, these courses are not tailored to specific job opportunities, limiting their effectiveness.
The Lifetime Skills Guarantee offers over 400 free Level 3 qualifications, but these are only available to those without a current Level 3 qualification, leaving many workers who need retraining excluded. Additionally, these programs do not capitalise on workers' existing occupational knowledge and skills.
The National Careers Service provides the Discover Your Skills and Careers tool, which asks those seeking new skills about their interests, motivations, and preferences but lacks a serious focus on their current or previous occupations. The Department for Education’s Education Hub offers information on various upskilling opportunities, including Skills Bootcamps, which provide industry-recognized training. However, these resources do not tailor searches to an individuals’ employment history or skills profile, limiting their relevance and usefulness for workers seeking to transition into new roles.
What might more detailed skills data look like?
There is not a UK-specific taxonomy of skills. Existing analyses of work tasks in the UK (such as those produced by the New Economics Foundation, Resolution Foundation, and the Office for National Statistics itself) tend to use the American O*NET classification of skills and translate this onto UK occupational classifications. However, this approach is imprecise, as the occupational taxonomies from the US Bureau of Labor Statistics and the UK ONS are not directly comparable, and there is no exact crosswalk between American and British occupations.
The American system offers a valuable blueprint for what detailed UK skills data could look like. Instead of relying on general proxies like formal education, O*NET provides specific scores that measure the intensity of skills required across different occupations. These skills are categorised into five main areas: technical skills, social skills, resource management skills, complex problem-solving skills, and system skills (such as evaluating the relative costs and benefits of potential actions). Within these categories, O*NET breaks down skills into 25 detailed metrics. For example, under technical skills, O*NET provides scores for 11 distinct abilities, including equipment maintenance, installation, and quality control analysis.
As an example of what these data could tell us, Table 3 provides the average skills match-up score between the five main task categories. This information could help policymakers identify skills crossovers and gaps across the workforce, beyond someone’s level of formal education.
Table 3. Occupational Task Alignment Scores (Using US O*NET Occupations; Rows 1-26 of 758)
Author’s analysis of O*NET data using cosine similarity indexing
The skills metrics form only a part of the wealth of data available in the O*NET database. There are further data categorising occupations by abilities (as in cognitive abilities like perceptual awareness or psychomotor abilities like reaction time), interests (whether investigative, artistic, enterprising, etc.), and subject knowledge.
The UK could similarly collect data across a wide range of different metrics. The greater their specificity, the more useful these metrics will be to policymakers wanting to identify the skills crossovers between workers and occupations.
How could these new skills data support the government's skills strategy?
With a British equivalent to O*NET, policymakers and researchers could identify skills needs at a sectoral level, better map qualifications to skill supply and demand, and more accurately identify gaps in the labour market. These analyses are not currently possible with existing data.
Which countries have done a better job with data-driven skills policy?
In the UK, the Migration Advisory Committee already uses innovative data methods to judge which skilled occupations do not currently have enough workers in the country. This could go further. The EU’s European Skills Agenda (which includes its own taxonomy of occupations, skills, and qualifications) facilitates the Skills-OVATE project, an initiative using online job advertisements to improve timely data collection on skills needs.
In the Netherlands, the House of Skills – a public-private partnership – has worked to improve job search and matching practices in the Amsterdam region through better occupation and skills data collection. UNESCO has also helped develop richer skills data in Malawi, Myanmar, and for young people in the Mediterranean to understand labour market demands in these economies.
These examples illustrate how enhanced and innovative data collection can help governments anticipate future skills needs—exactly as Skills England should aim to do. Improved data have already shown how new technologies are shifting skills requirements in various sectors globally, including the agritech industry in Israel, the care sector in Ukraine, the energy sector in Albania and Tunisia, the automotive sector in Turkey, and the agriculture sector in Morocco. It is time the UK government developed a similar approach.
Joe Peck is a research analyst at the Urban Institute in Washington, DC, and is a freelance advisor on UK policy. His research examines how governments can improve economic mobility for those in work, focusing on industrial legislation. He has previously worked at the Federal Reserve, the Yale Sociology Department, the Center for Economic and Policy Research, and under Katherine S. Newman, provost and professor of public policy at the University of California, Berkeley. He holds a BA from Yale University and an MRes from University College London.