A recent report from the skills charity Enginuity reveals that closing the skills gaps and shortages in the UK engineering and manufacturing sectors could create economic opportunities equivalent to supporting over 300,000 apprenticeships each year.
The organization emphasizes that tackling these ongoing skills challenges could not only help reduce the number of young people who are not in education, employment, or training (NEET) but also alleviate some of the pressure on the UK’s benefits system within just three years.
Enginuity’s “Mind the Gap” report highlights that skills-related issues are costing the engineering and manufacturing sectors around £5.2 billion every year. It warns that without immediate action, we risk further impacting the “lost generation” identified by Alan Milburn.
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Previously known as the Sector Skills Council for engineering and manufacturing, SEMTA, Enginuity points out that the industry is facing a “perfect storm” of interconnected factors that could worsen skills gaps and shortages over time.
The £5.2 billion annual economic impact represents a huge missed opportunity for UK industry.
Enginuity estimates that this figure translates to the potential for over 300,000 apprenticeships annually, based on typical starting salaries in engineering and manufacturing.
The charity believes that taking action on this scale could significantly reduce the NEET population by 30%, while also helping to lighten the burden on the benefits system.
Ann Watson, CEO of Enginuity, stated: “These findings reveal a major productivity challenge for our sector, but they also present a clear opportunity. As the UK aims to enhance growth, we simply cannot afford to let talent, investment, and potential slip away.
“We have a generation of young people struggling to find meaningful work, employers desperately seeking skilled talent, and rising economic inactivity putting more strain on public finances. The solution is right in front of us.”
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“The government really needs to pay attention to these findings and make sure they’re taken into account when working to eliminate the barriers that hinder growth and the influx of talent into the sector.”
Watson went on to say, “Through The Policy Centre for Supply Chain and SMEs: Powered by Enginuity, we’re committed to sharing these findings and recommendations directly with the government and collaborating with them to drive meaningful change.”
Manufacturing SMEs Struggling with Skills Gaps and Shortages
Survey data from SQW reveals that skills challenges are particularly prevalent among engineering and manufacturing SMEs.
About half of the SMEs surveyed reported facing skills-related issues over the past year, with 36% noting skills gaps and 35% indicating skills shortages.
For those with skills gaps, businesses estimate that around one in five employees is impacted. SMEs dealing with shortages typically have between two and three positions that are tough to fill.
Companies reported a lack of core technical and manual skills, along with increasing gaps in digital, data, and managerial expertise.
These challenges aren’t just limited to entry-level roles. The report indicates that they are often linked to lost productivity, which can lead to higher turnover rates and hinder future growth.
According to the survey data and economic modeling, skills-related issues are estimated to cost the engineering and manufacturing sector around £5.2 billion each year, which is about 10% of the annual output of the affected firms.
On a company-by-company basis, those impacted could be losing as much as 10% of their annual Gross Value Added (GVA), translating to roughly £110,000 per business annually.
Ageing Workforce Intensifies Skills Challenge
The report points to a “perfect storm” of interconnected factors contributing to the skills shortages and gaps in the sector.
A key issue highlighted is the ageing workforce. Many skilled workers are nearing retirement, while there aren’t enough young people stepping into engineering and manufacturing roles to take their place.
The shortages we’re seeing are especially pronounced in advanced technical positions.
The report highlights a concerning lack of talent coming into the field. Not enough young people and those looking to switch careers are opting for engineering and manufacturing jobs, partly due to misconceptions about salaries and career opportunities.
Many still view engineering and manufacturing roles as dirty or low-paying, which is one of the issues raised. Additionally, there’s a growing societal push for higher education, along with younger workers’ expectations for remote work and flexible hours that don’t always match the reality of many manufacturing jobs.
SMEs Struggle with a Skills and Productivity Cycle
Small and medium-sized enterprises (SMEs) often find it particularly challenging to tackle these talent pipeline issues due to their limited time and resources.
Enginuity’s research paints a picture of a vicious cycle where skills gaps and shortages hinder productivity, lead to higher turnover, and limit the budgets available for employee training. This creates a feedback loop that can exacerbate existing shortages.
While apprenticeships are seen as a promising way to bolster the talent pipeline, the report notes that they can be quite costly for SMEs, mainly because they require significant time and involvement from more experienced staff.
As the demand for skills grows, companies are increasingly vying for the same talent, both within their sectors and across different industries. This creates a risk for SMEs that invest in training, as they might lose skilled workers to other SMEs or larger firms.
SMEs Experience a ‘Postcode Lottery’ in Training
Another major issue raised by SMEs is the inconsistency in training quality and availability.
Businesses describe a “postcode lottery” when it comes to the quality of training providers, along with outdated course content and delivery methods that often don’t align with the needs of manufacturers.
SMEs have expressed a desire for shorter, more modular, and practical training options. However, the current offerings often require lengthy and costly absences from the workplace.
About half of the businesses and experts involved in the research think that skills challenges are likely to get worse in the next five years.
Enginuity emphasizes that we need clear and coordinated action to tackle the information gaps, signaling issues, and coordination failures that are fueling this problem.
The research indicates that addressing the skills shortages in engineering and manufacturing could bring benefits that go beyond just individual companies. It could boost productivity, create more opportunities for young people to enter skilled jobs, and ultimately strengthen the UK’s industrial workforce for the future.
