A Closer Look

Skills Shortages in UK – The talent already in short supply will be in even greater demand by 2030

Profound structural shifts are under way in the UK workforce. Here’s how companies can prepare to meet the challenge and nurture the skills and talent that will help them stay competitive.

The adoption of automation, along with technologies such as artificial intelligence (AI) and the Internet of Things, is likely to unleash profound structural shifts in the UK workforce—which will be amplified by other megatrends such as the aging population. As a result, demand for occupations such as managers, technology specialists, and health professionals could rise nearly 20 percent by 2030, while demand for administrative and manual roles could decline just as steeply.

Our research shows that UK companies will need to respond to these threats by transitioning up to a third of their workforces into new roles or skill levels over the next decade. If they fail to meet this challenge, they could find themselves with even more acute shortages of talent than today. These potential talent shortages will not only be among technology specialists and engineers, but also among the managers needed to lead change and upskill teams, especially in customer-facing service roles. By 2030, two thirds of the UK workforce could be lacking in basic digital skills, while more than 10 million people could be underskilled in leadership, communication, and decision making.

Technology-adoption trends are a tremendous opportunity for UK businesses in all sectors—not just a disruption to be feared. Companies that move fast to take advantage of automation and digitization—and build or find the relevant skills to enable that transformation—will boost productivity, accelerate innovation, and better engage both customers and employees.

In this article we highlight the looming skills mismatches that could beset UK companies if they fail to prepare for the shifts ahead. Our Occupational Talent Shortage Index pinpoints where employers are likely to be short—and long—on talent. We also outline a set of creative steps that companies can take in a disrupted market to find and nurture the skills that will help them win in the future.

Mind the gap: Why the talent already in short supply will be in even greater demand by 2030

The impact of the Fourth Industrial Revolution on the future shape of work will be profound. Modeling by the McKinsey Global Institute (MGI) on the effects of technology adoption on the UK workforce shows that up to 10 million people, or around 30 percent of all UK workers, may need to transition between occupations or skill levels by 2030.

Moreover, technology affects higher- and lower-skilled workers very differently. It tends to augment highly skilled workers, for example, by making doctors more efficient and effective at treating patients. This tends to increase demand for the services that such professionals provide, which in turn increases their employment. In contrast, when the tasks performed by workers require lower skills, those workers can be substituted with machines more easily. In the short term, this tends to lead to talent shortages among high-skilled occupations—along with a narrowing of job opportunities for lower-skilled workers. To test the application of this trend in the UK job market, MGI and McKinsey’s UK and Ireland office analyzed the projected growth in employment of 369 different occupations from 2017 to 2030. We placed those occupations into five quintiles, with top-quintile occupations exhibiting the strongest, and bottom-quintile occupations the weakest, projected employment growth.

This occupation-by-occupation modeling suggests that demand for occupations in the top quintile will increase by an average of about 19 percent from 2017 to 2030, which equates to 1.4 percent per annum. Those occupations include management roles in a host of sectors, as well professional roles in information and communication technology (ICT), engineering, health, and teaching. Over the same period, demand for bottom-quintile occupations is expected to shrink by about 17 percent. Those occupations include administrative and secretarial roles.

The challenge for UK companies is that the top-quintile occupations—those in which employment demand will grow fastest—are also those already facing a shortage of workers. In other words, acute talent shortages are on the horizon in the occupations that are most critical for business and economic growth. People in these management and professional positions also play a fundamental enabling role—in their firms and in the broader economy—as they often help other workers strengthen their skills and improve their performance.

Several statistics reinforce this concern. The top-quintile occupations on our list had a weighted average vacancy rate of 3.6 percent in 2016, compared to 2.4 percent across all occupations—and they also have below-average unemployment rates. Their weighted average median hourly pay in 2018 amounted to £16.4, compared to £14.7 across all occupations. Between 2001 and 2017 these occupations experienced annual average employment growth more than double that of all occupations. They also rank highest in an independent assessment of areas of labor market tightness: the Shortage Occupation List compiled by the Migration Advisory Committee (MAC).

Chosen excerpts by Job Market Monitor. Read the whole story at Tackling shortages in the UK workforce by rethinking skills and the future of work | McKinsey

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