The UK Employer Skills Survey (ESS) is one of the largest business surveys in the world, with the data in this report based on survey responses from over 87,000 employers. This research provides a comprehensive source of intelligence on the skills challenges that UK employers face both within their existing workforces and when recruiting, the levels and nature of investment in training and development, and the relationship between skills challenges, training activity and business strategy.
The 2017 survey is the fourth in a series conducted biennially since 2011 (with nation- specific skills surveys pre-dating this). The ESS series therefore provides rich labour market intelligence from the period when the UK economy was emerging from the recession of the late 2000s, to more recent years when the UK has experienced relatively sustained economic growth and high levels of job creation.
The latest survey was carried out between May and October 2017. Employers with at least two people on the payroll were in scope, and interviews were conducted at an establishment level with the most senior person at the site with responsibility for human resources and workplace skills.
Recruitment and skill-shortage vacancies
Levels of recruitment activity provide an indication of growth and change in the labour market and wider economy. Recruitment activity has continued to grow since 2015, with one in five UK employers (20%) having any vacancies at the time of fieldwork (a one percentage point increase from 2015), with these employers reporting a total of just over one million vacancies (1,007,000), a 9% increase on the figure in 2015.
Growth in recruitment activity was evident across most of the UK; most notably in Northern Ireland which had the largest proportional increase compared with 2015 in the number of vacancies reported (an 18% increase). The exception was in Wales where the number of vacancies was unchanged from two years ago.
When employers have vacancies, potential employees are either able and willing to meet employer requirements, or they are not. In line with previous years, a third of vacancies in the UK (33%) were considered hard to fill. When employers struggle to fill vacancies, this is often due to a lack of the required skills, qualifications or experience among applicants. Collectively these are known as ‘skill-shortage vacancies’. Although relatively few employers experienced them at the time of the survey (6%, the same proportion as in 2015), these employers reported a range of impacts resulting from them, including:
- increased workloads for other staff;
- loss of business or orders to competitors;
- delays developing new products or services; and
- difficulties introducing new working practices.
There has been an 8% increase in the number of skill-shortage vacancies compared with 2015: from 209,000 to 226,000. This increase in the number of skill-shortage vacancies was similar to the proportional increase in vacancies, meaning the density of skill- shortage vacancies (i.e. the proportion of vacancies that were hard to fill because of reported skill shortages) has remained stable since 2013 at 22%.
Reported skill shortages when recruiting were particularly prevalent in certain sectors. They were most numerous in the Business Services sector (just under 52,000 at the time of the survey), though as a proportion of all vacancies in the sector, the density of such vacancies was highest in Construction where over a third of vacancies (36%) were considered skill-shortage vacancies (a similar level to 2015).
By occupation, employers were most likely to have experienced skills-related difficulties when recruiting for Skilled Trades positions (such as chefs, electricians, and vehicle technicians). Around two in every five Skilled Trades vacancies were proving hard to fill for skills related reasons (42%). This occupation has had the highest density of skill- shortage vacancies in all previous iterations of the ESS series.
The skills that employers found to be lacking among applicants ranged across both technical and practical skills, and people and personal skills. On the technical side, employers reported a lack of digital skills, skills related to operational aspects of the role, and a lack of complex analytical skills. The main people and personal skills lacking predominantly related to self-management skills, management and leadership, and sales and customer handling skills.
The skills lacking among applicants vary quite substantially depending on the role. For instance, the skills disproportionately reported to be lacking among applicants for Skilled Trades positions included manual dexterity and the ability to adapt to new equipment or materials. Whereas the skills disproportionately lacking for Professionals included advanced IT skills and complex analytical skills.
The majority of hard-to-fill vacancies (67%) are caused, at least in part, by a lack of skills, qualifications and experience among applicants. However, vacancies can also prove hard to fill for other reasons. Such reasons principally include a lack of applicants for the role (something which may be skills related if applicants do not apply because theadvertised role has high and clearly stated requirements), or specific issues related to the job role (e.g. unattractive terms and conditions or unsociable hours) or the employer (e.g. remote location or poor transport links).
Overall there were around 110,000 vacancies that employers were finding hard-to-fill exclusively for reasons unrelated to applicants’ skill levels (11% of all vacancies). This represents an 18% increase on the number of these vacancies reported in 2015, far higher than the increase in the overall number of vacancies (9%), suggesting a growing general (non-skills-related) recruitment challenge in the economy.
By sector the proportion of vacancies proving hard to fill exclusively for non-skills-related reasons was highest in Health and Social Work (19%, up from 13% in 2015). In this sector the density of skill-shortage vacancies has remained fairly static in recent years, indicating that difficulties filling vacancies in this sector are increasingly due to non-skills- related reasons.
Among employers who had vacancies that were proving hard to fill, one in three (34%) had attempted to recruit EU nationals to try to help overcome recruitment difficulties. This was a particularly common way of trying to fill hard-to-fill vacancies in the Hotels and Restaurants sector (53%).
Skills gaps in the workplace
Alongside skill shortages that may be experienced when recruiting, employers may also experience skills gaps in their existing workforce. This internal skills challenge arises when employees lack proficiency to fulfil their role. Such skills gaps, where persistent, may hinder an employer’s ability to function to its full potential in terms of productivity and profitability.
Although most employers in the UK considered their existing workforce to be fully proficient, 13% reported skills gaps in their workforce and approximately 1.27 million staff lacking full proficiency in their role (equivalent to 4.4% of the total UK workforce). This continues a trend of a steady decline over the course of the ESS series both in the proportion of employers reporting skills gaps (from 17% in 2011), and in the proportion of the workforce considered to lack proficiency (from 5.5% in 2011).
The overall decrease in skills gap density at a UK level was broadly reflected across most sectors of the economy. Hotels and Restaurants (6.7%) and Manufacturing (5.8%) were again the two sectors with the highest proportions of their workforce lacking full proficiency, albeit at lower levels than in 2015. The largest decrease in the density of skills gaps was in the Public Administration sector (from 6.4% in 2015 to 3.9% in 2017). Two sectors which saw an increase in the density of skills gaps were Financial Services (from 3.7% in 2015 to 5.0% in 2017), and Primary Sector and Utilities (from 3.8% to 4.7%).
At an occupational level, skills gaps continued to be more prevalent in what might be described as ‘labour intensive’ roles (i.e. Elementary occupations and Machine Operatives) and ‘service intensive’ occupations (i.e. Caring, Leisure and Other Services staff and Sales and Customer Service staff).
Transient factors, such as staff being new to the role or training only being partially complete, were a contributing cause of most skills gaps (76%): one would expect these skills gaps to be resolved over time. While the proportion of skills gaps caused at least partly by transient factors has increased slightly since 2015 (73%), the proportion that were exclusively attributed to transient causes remained unchanged at 22%.
Other causes of skills gaps included staff lacking motivation (a contributing factor for 32% of all skills gaps), staff performance not improving following training (31%), and staff not receiving appropriate training (25%). Skills gaps may also be a by-product of organisational innovation, such as the introduction of new working practices, new technology, and new products or services. However, the proportion of skills gaps attributed to these factors has declined since 2015 (34% in 2017 compared with 37% in 2015).
Two-thirds of employers with skills gaps (66%) reported that lack of proficiency among their staff was impacting the performance of their organisation, mainly through increased workloads for other staff, followed by higher operating costs and difficulties meeting quality standards.
Most employers with skills gaps (85%) had taken steps to try to improve the proficiency of their staff, most commonly through increased training activity. A further 5% of employers with skills gaps had not yet acted in response to skills gaps but planned to do so in the future. One in seven employers with skills gaps (14%) had looked to recruit EU nationals in response to their internal skills challenge; this was most common in the Hotels and Restaurants sector (27%).
As was the case in 2015, the most common skill lacking among staff was time- management and prioritisation of tasks, contributing to nearly three-fifths of all skills gaps (59%). Other causes of skills gaps included deficiencies in sales and customer skills, and a lack of knowledge of an organisation’s products, services and processes (both 49%).