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Martin Gilbert: Business revival real but skills shortage a serious problem

Martin Gilbert.
"Intensive programme" of training and development key, says Martin Gilbert.

In a fiercely competitive global economy there’s one basic element that is indispensable to creating a successful business – a skilled workforce updating its expertise by retraining as necessary.

The pandemic was a key influence on this aspect of business.

Some companies, struggling to economise, relegated the tackling of skills shortages far down their list of priorities.

They are now paying the price with workforces inadequately equipped to compete in the post-pandemic economic revival.

Aberdeen city centre from above.
Office space take-up in the Aberdeen area this year is the highest since 2015.

But many firms took a longer view, embracing technology to provide new ways of interacting with customers and suppliers, expanding their markets and emerging from lockdown more streamlined and competitive.

Business revival is real: in Q2 of this year office space take-up in the Aberdeen area was the highest since 2015, with 60,000sq ft transacted.

However, there’s a serious problem. At UK level 68% of small and medium-sized enterprises are suffering from skills shortages, and among larger firms the figure is 86%.

These deficiencies are affecting companies’ performances, with 28% of firms reporting they have had to turn down work and 78% experiencing reduced output, profitability or growth.

Report shows 70% of respondents facing skills shortages

In Scotland, the Open University’s annual Business Barometer report for this year showed 70% of respondents reporting they were facing skills shortages, an increase from 62% last year.

A record number of 1.3 million job vacancies in the UK demonstrates there is a problem that clearly relates to skills issues.

A quarter of population will leave workplace by 2050

By 2030 one-fifth of Scotland’s population, including many skilled workers, will be of retirement age. By 2050 one-quarter of the population will have left the workplace.

To overcome the challenge of labour and skills shortages we need to launch an intensive programme of training and development.

In the north-east the most obvious sector with a requirement for retraining and development is offshore energy, which accounts for around one in three jobs in the region.

Picture shows somebody studying digital skills training.
Reskilling can embrace a suite of disciplines.

A report from the Energy Transition Institute at Robert Gordon University on the offshore energy workforce estimates that, if it succeeds in establishing itself as a global energy hub, the north-east has the potential to grow from 45,000 jobs today to 54,000 by 2030.

If it fails, the workforce could decline to as low as 28,000 during the same period.

Reskilling will be crucial. The transition envisaged would require around 14,000 workers in the region to transfer from oil and gas to renewables and 16,000 new employees to join the industry between now and 2030.

Key component is digitalisation

Upskilling will be needed for up to 10,000 people with medium to low transferability to adjacent energy sectors.

The need for training and development applies across all business sectors in the north-east. A key component is digitalisation, which for some firms will mean the difference between success and failure.

Oil rig.
Transition will require around 14,000 workers in the north-east to transfer from oil and gas to renewables.

Yet the Open University report found among micro-organisations with fewer than 10 employees, only 39% were planning to increase staff training investment in 2023.

There’s no shortage of help. Through the leadership of Opportunity North East (One), the Future Skills Partnership website has been established to boost digital skills across the region.

A major asset to business in the north-east is the One Tech Hub in Aberdeen, facilitating digitalisation for firms and the expansion of technology companies in the area.

Apprenticeships vital for developing skills

Nationally, Skills Development Scotland is bringing together potential employees and businesses, and directing skills training to meet the needs of companies. Apprenticeships are also key to developing skills, with employers playing a central role.

Peter Farrer, the new chairman of employer-led body the Scottish Apprenticeship Advisory Board, recently defined his ambition. He said: “I want there to be an apprenticeship available to every young person who wants to do one in Scotland, and for any employer to be able to offer apprenticeships in their field.”

Easing of Covid restrictions triggers apprenticeships recovery

There were 1,284 modern apprenticeship starts in Aberdeen and Aberdeenshire in 2020-21, down from 1,967 the previous year; this figure increased to 1,707 in 2021-22, as the constraints of Covid were relaxed. We need to expand that recovery.

Some hard-pressed business people may be asking themselves whether they can afford to invest in training and development.

The question they should be asking is whether they can afford not to.

Martin Gilbert is a co-founder and former chief executive of Aberdeen Asset Management.