Landmark Report Sets Out Action to Address Key Skills Gaps

Skills England has published its first Annual Skills Report, providing the most comprehensive picture to date of current and future skills demand across England

Landmark Report Sets Out Action to Address Key Skills Gaps

• Skills England has today published its first Annual Skills Report, providing the most comprehensive picture to date of current and future skills demand across England

• it sets out actions to tackle key challenges and build a more responsive, high-quality skills system

• new analysis shows demand in priority sectors will grow by 24% over the next decade

• up to 1.8 million additional workers will be needed to meet this demand

The Alan Milburn interim report into young people and work, published last week, found that nearly one million 16 to 24-year-olds are currently not in education, employment or training (NEET), underlining the need to better connect young people to jobs and training. At the same time, Skills England’s new analysis shows demand across priority sectors is expected to grow by around 24% over the next decade — equivalent to an additional 1.8 million workers.

Together, these trends underline the urgent need for a more agile, high-quality skills system that can respond to the needs of a fast-changing economy while opening up opportunities for young people.

The Annual Skills Report draws on detailed skills needs assessments across ten priority sectors critical for driving economic growth. It sets out priorities for strengthening the skills system, making sure it delivers for the Industrial Strategy and better meets the needs of employers, including small and medium sized businesses (SMEs), and supports individuals into good jobs.

The top five challenges identified in report and the targeted action Skills England will take are:

1. Addressing skills shortages: Demand for key occupations will grow by nearly 25% in the next decade. Reskilling and upskilling workers will be essential. Skills England will review and reshape the mix of apprenticeships and technical education, so training is closely aligned to labour market priorities.

2. Maximising employer investment: The long-term decline in employer investment continues and SMEs struggle to engage in the skills system. Employers want training that is relevant, responsive and gives a clear return on investment. Skills England will deliver this by using data, AI-enabled insight and a new expert network to adapt training at pace, giving businesses the apprenticeships and short course they need to develop their workforce.

3. Responding to rapid adoption of AI: AI will affect almost every job and sector, but the pace of this change and the future skills requirements are uncertain. Skills England will define and embed core AI skills in technical education to equip the workforce to adopt new technologies at pace.

4. Supporting young people’s employability: The Milburn Review has warned that the number of young people not in education, employment or training could rise to 1.25 million over the next few years. At the same time, employers report gaps in work-readiness. Skills England will work with partners, including Youth Employment UK, to improve how employability skills are recognised and valued by employers, alongside supporting higher-quality work experience.

5. Building a responsive place-based skills system: The national skills framework needs to enhance local systems by aligning data and insight to shape provision in a local area. Skills England will work with Strategic Authorities and other local partners to better connect people to jobs. The Skills England Investment and Infrastructure Service provides major projects with expert advice and works with local partners to support businesses deliver a skilled workforce.

The report emphasises that no single organisation can address these challenges alone, and highlights the need for stronger partnerships between employers, providers, local leaders and government. 

Baroness Jacqui Smith, Minister for Skills:

Today’s report highlights the importance of making sure our workforce has the skills it needs today, while preparing for the demands of tomorrow. With 1.8 million new priority jobs expected by 2035, we are determined to keep this country at the cutting edge of fast-growing sectors like AI and the creative industries. Our reforms to the apprenticeship and skills system, alongside continued engagement with employers, will ensure people can build long lasting and fulfilling careers that work for them and the wider economy.

Phil Smith, Chair of Skills England, said:

We’re expecting strong growth in priority jobs, which presents a huge opportunity for the UK. But to realise it, we must urgently address the skills gaps holding people and businesses back. The Milburn review findings made clear the scale of the challenge, particularly with so many young people currently not in education, employment, training. Employers – especially small and medium-sized businesses – also have a critical role to play in investing in apprenticeships, training and reskilling staff. I’m proud of what Skills England has achieved in its first year. This report sets out how we will work with partners across the system to tackle these long-term challenges and make sure people and businesses can thrive.

Laura-Jane Rawlings MBE DL, CEO of Youth Employment UK, said:

Skills England’s first Annual Skills Report lands at a critical moment. With more than one million young people now not in education, employment or training, and demand in priority sectors set to grow significantly, we have to connect the youth employment challenge with the skills and workforce needs of the economy. Young people are not short of aspiration, but too many are still locked out by unclear pathways, limited access to work experience, uneven local support and employers who often want to help but find the system difficult to navigate. A more responsive skills system must make it easier for employers, especially SMEs, to invest in young talent and to understand the practical steps they can take. Youth Employment UK welcomes Skills England’s focus on employability, employer engagement and place-based skills systems.

Sara Todd, Chief Executive of Trafford Council, said:

It’s great to see Skills England shining a light on how much Place matters when it comes to skills. What works in one area won’t always work in another, and local leaders know their economies best. Strategic Authorities are already bringing businesses, providers and communities together to make training match real jobs. This report recognises that and backs a more local approach. If we keep building on that, we can make it easier for people to get the skills they need and help local economies grow in a way that works for them.