Skills shortage costing Scottish organisations £352 million

A large majority of organisations surveyed in Scotland (86%) struggled to find workers with the right skills over the past 12 months, according to a new report commissioned by The Open University.

The Open University Business Barometer, which monitors the skills landscape of the whole UK, reveals that employers in Scotland are paying a high price to ensure their organisations have the skills required to remain productive.

The shortfall is now costing Scottish organisations an extra £352 million a year in recruitment fees, inflated salaries, temporary staff, and training for workers hired at a lower level than intended.

With skills in short supply, more than three in five senior business leaders in Scotland (64%) find that the recruitment process is taking longer – with most of those (89%) saying on average recruitment is taking at least a month longer this year than in the year previous.

As a result, just over half (53%) of Scottish businesses report spending more on recruitment – a total of £70 million more than expected.

While the process is taking longer, when talented workers with in-demand skillsets are identified, they are able to take advantage of their strong position, driving employers in Scotland to spend an additional £81 million on salaries.

Almost half of Scottish employers (48%) increased the salary on offer in the last year, by an average of £2,132.

Many organisations have been forced to give up on finding appropriate talent, choosing either to hire at a lower level than intended (57%) or to leave the role vacant (50%).

To address the gaps left by doing this, employers in Scotland spent £114 million on training to bring workers up to the level required and a further £87 million in temporary staffing.

Training up workers hired at a lower level accounts for the biggest chunk of Scotland’s £352 million spend, at just under a third (32%). The figure for the whole UK is 23%.

This could imply that Scottish organisations are taking a longer-term approach than other areas of the UK, where increased salaries and temporary staffing are more significant expenses.

The financial impact is not the only drawback of the skills shortage. Almost two in five organisations in Scotland (37%) admit they are not as agile as they need to be due to a lack of skills.

Management and leadership skills are particularly important for navigating change smoothly, yet seven in ten organisations (70%) said the role they struggled to hire for most recently was a leadership or management position.

Over half of senior leaders in Scotland (53%) expect the situation to deteriorate over the next 12 months, with 59% anticipating it will be harder to find staff with the right skills after the UK’s official departure from the EU.

Marie Hendry, Depute Director for External Engagement and Partnerships at The Open University in Scotland, said: 

“This survey shows that Scotland’s employers are spending upwards of £350 million dealing with skills shortages in their organisations, but most of that is on mitigating problems rather than solving them – extra recruitment costs, increased salaries and temporary staff. That just pushes the problem down the road.

“Work-based learning and training, such as Graduate Apprenticeships, means that employers can upskill and reskill their staff, growing their own talent and creating more stable and sustainable workforces.

"It’s encouraging to see that Scottish organisations are directing more of their spending to training to solve skills issues than the UK average, but there’s room for us to do a lot more to give our people the skills they need to help our businesses succeed.”

The full report is available at www.openuniversity.co.uk/ukskills

• Methodology: The research, carried out by PCP Market Research, surveyed 950 senior business leaders across all nations, regions and sectors in the UK in May 2018. 150 of these were based in Scotland. The national data is nationally representative as it was weighted by UK nation, region, business size and sector. A full methodology for the financial calculations is available on request: www.openuniversity.co.uk/methodology
• Photo, top left, by Helloquence on Unsplash