Journal column: The skills shortage and poor productivity are urgent issues

Posted on the 19 October 2017

Journal column: The skills shortage and poor productivity are urgent issues

Read our Chairman, Nigel Mills' latest column, as featured in The Journal on 19/10/17

The stark headlines in last Friday’s Journal reporting the dramatic fall in the number of new apprenticeships was a clear shot across the bow of businesses aiming to remain productive and competitive in post-Brexit Britain.

According to the report, since the introduction of the Government’s Apprenticeship Levy there has been a 61% fall in the number of young people enrolling on schemes.  While many have clamoured to denounce the levy and declare it is not working, I believe it exposes an even deeper issue that goes to the heart of our ambitions to be an economically-strong and productive region.

Whenever we poll our members, one of the main challenges to growth that they consistently report is the lack of available skilled individuals.  But this is, of course, not confined to members of the Entrepreneurs’ Forum, and is recognised as one of the five main barriers preventing UK businesses from successfully scaling up their operations.

Skills shortages have plagued the economy for decades, only softened by our ability to bring in labour from other countries, an issue that very much on the radar of a range of businesses keeping a sharp eye on the Brussels negotiations.  Record low high levels of employment will be hit if and when this changes and make many realise we are living in a fool’s paradise when we see the skills pool quickly evaporate.

This is an issue linked directly into another economic problem facing Britain, the productivity puzzle.  Figures released earlier this month showed that productivity fell in the three months from April to June 2017, which maintains the worker output gap of around 15 percent between the UK and the rest of the G7 countries.

To put this in context, I read a report by the Productivity Leaders Group in the summer, which puts the numbers into very telling real-world scenarios. For example, the group suggests that UK productivity is so poor that the average German worker could go home early on a Thursday afternoon and still have produced as much as a British person who worked through to clocking out time on a Friday. 

If businesses are to succeed in an increasingly competitive international marketplace productivity has to be at the core of business strategy, which means investing in skills.  This region has five exceptional universities and some of the UK’s leading vocational training providers producing some extremely talented people that, if retained in the North East, can play a part in our future prosperity. 

In a time of such high-employment, when available skilled people are at a premium, development of the existing workforce is also a key to unlocking improved productivity with ongoing training no longer a being luxury option for those businesses trying to establish or maintain their positions in markets where competition is rife.

The skills gap is just one piece of the puzzle.  Businesses also have to look at their processes and how they invest in capital equipment that can make their operations more effective. 

Entrepreneurs are very good at looking at the bigger picture and this has never been more important.  Not being able to find skilled people can no longer be an excuse, it should be a driver to use resources, innovative ideas and new ways of working to increase productivity.

By doing this, businesses can make the most of the post-Brexit picture that the politicians are painting for our economy.