Talent and Skills

Upskilling the UK workforce to help scaleups access the talent they need

With their innovative products and services and their flexible way of approaching the business environment, scaleups are talent-hungry and eager for recruits with the right set of skills. Access to the talent they need to grow remains a critical challenge for UK scaleups in 2020 with 65% rating access to talent as “very important” or “vital” in our 2020 Business Survey – with 19% rating it a top priority. 

Overcoming this challenge must therefore form a significant part of plans to safeguard future UK economic growth, and ‘build back better and level up’ by connecting all to the jobs of tomorrow. 

This talent pipeline should be grounded in both a robust and forward looking domestic skills agenda and a series of fast-tracked processes specifically designed to facilitate timely acquisition and retention of world-class excellence from abroad. Both domestic and international talent is needed to ensure that our scaleup businesses can continue to grow to global scale. 

WHY TALENT MATTERS

In the most recent year of official figures – 2018 – scaleups employed 3.5 million people, up from 3.4 million in 2017. In the 2020 Scaleup Index of more than 7,000 visible scaleups, employment stands at almost 2 million people, up from 1.6 million in 2019. Even at the height of the lockdown period, job creation was the second most cited reason by scaleups for raising money¹.

Driven by Covid-19 there has been a substantial contraction in the jobs market since 2019. There were 631,829 vacancies in the UK in October 2020 – a 38% reduction from the same period in 2019². Whilst this is significantly weaker than in previous years, it is a notable recovery compared to May this year when just 360,183 positions were available. This suggests that the most acute effects on the availability of positions may be temporary and very sector specific even if longer term employment challenges persist – the most recent data from the Labour Force Survey (LFS) shows the UK employment rate has been decreasing since the start of the coronavirus pandemic and the official unemployment³ rate is now rising sharply⁴.

It is therefore encouraging to see that despite Covid-19 challenges, scaleups remain significant UK employers with a diverse talent pool. They employ UK nationals as well as international talent (62% employ people from the EU and 38% employ people from outside the EU) and are key employers of graduates (82%), and postgraduates (39%). The furlough process, which the ScaleUp Institute worked on with many others as Government evolved it, has been an important staff retention tool and was used by 60% of scaleups. Many scaleups are also hiring – with 7 out of 10 planning to increase headcount next year, and a quarter planning to do so by more than 20% (3.2% are planning to double in size in 2021).

Scaleups are also twice as likely to be providers of apprenticeships, internships and work experience than other businesses. They are clear that they want to provide more for our emerging generation in such activities. They highlight that funding schemes that support this⁵, as well as improving entrepreneurial education and careers advice, would make a significant step change in addressing their upcoming talent pipeline needs, in addition to simplified and better signposting of opportunities. 

THE WAY AHEAD – RELEASING AND REALISING THE POTENTIAL

• Addressing the skills for today and tomorrow: upskilling and lifelong learning 

Reflecting the current sentiments of our UK scaleup CEOs at its recent Jobs Reset Summit 2020, the World Economic Forum re-emphasised that a mix of hard and soft skills are most in demand from employers: these include working with people, problem-solving and self-management skills⁶. This mirrors our Scaleup Business Survey 2020 where scaleups rated social skills, technical skills and service orientation as key, with critical thinking their most desired future skill. 

This means that in the UK we need to continue to improve core communication skills and social skills as well as our STEM capabilities. Based upon PISA rankings⁷, the UK has shown marked improvement in Maths in recent years – rising from 27th to 18th – but it has not shown a similar improvement in Reading or Science. This remains disappointing and requires continued focus including at a regional level to address the disparities present⁸.

The 2020 Survey also reflects the continued drive forward by scaleups as early adopters of technology and digitisation; eight in ten scaleups use software to facilitate collaborative work; 64% use software to monitor the activities or productivity of the company; and 9 in 10 are now using virtual meeting software. Five in 10 plan even greater use of big data and AI in 2021, with blockchain and robotics increasingly on their agenda. 

This continuous technical skill drive and early adoption by our scaleups of technology solutions – which we have only seen increase as a result of the pandemic – means we must also pay attention to the upskilling and retraining of our adult skills base.

This is particularly so when we compare our trends to those in other countries. Unfortunately, despite the ongoing demand for a skilled workforce, fewer than 35,000 individuals are studying Higher National Certificates and Diplomas today compared to more than 100,000 in 2000. Those doing foundation degrees has declined from 81,000 to 30,000 over the same timeframe. As a result, in the UK only 10% of adults hold a Higher Technical Qualification as their highest qualification, compared to 20% in Germany and 34% in Canada. This is despite the fact that five years after completion, the average Higher Technical Apprentice earns more than the average graduate. Moreover, whilst the number of jobs requiring a PhD is 13% lower compared to the same time last year due to Covid-19, the numbers are substantially less impacted than the overall jobs market. This shows the durability of these skillsets in the world of work, and the businesses that employ them. 

The Industrial Strategy Council publication in June 2020 notes the relative weakness of UK skillsets in the projected workforce over the next 10 years stating “With roughly 80 per cent of the 2030 workforce already in the workforce today, reskilling the existing workforce will be the major challenge between now and 2030. By 2030, around 7 million additional workers could be under-skilled… Severe skill shortages are predicted in basic digital, core management, and STEM skills” ⁹.

We must meet this challenge head on if we are to maintain global competitiveness and to aid recovery from the impacts of the pandemic. 

Effective deployment of the Government Skills Toolkit Campaign will be essential. In this regard the development of a National Skills Fund announced in September, providing free college level education to adults without an A-level or equivalent, is very welcomed and necessary. So too is the commitment of a further £8 million for digital skills bootcamps – expanding successful pilots in Greater Manchester and the West Midlands – and the intention to broadening these to other sectors such as construction and engineering¹⁰.

It will be essential that these programmes reach all areas of the country to ensure that each of these initiatives are deployed in a way that maximises access within the workforce to the future skills that are consistently in demand by scaleup businesses. The initiatives can become a key plank to an Active Learning mindset which is itself becoming an in-demand skill¹¹. They present a real opportunity to create a step change in UK attitudes to individuals continuing to develop their skills throughout their whole working life, and develop both a robust skills base for growth, and the right culture to sustain this outlook for the long term. 

It is good to observe private sector programmes such as Google Digital Garage¹² and Digital Boost¹³ in relation to this, and we will be monitoring their effect in coming years.

• Unleashing the next Generation 

We must also ensure that the UK education system – from an early age – pays attention to entrepreneurialism and provides solid links to entrepreneurs, scaleups and the world of work. 

As highlighted above, scaleups play a valuable role in offering work experience, internships, and graduate employment. They want to do more of this for our emerging generation, and they highlight in particular the need for entrepreneurial education modules (44%), better understanding within careers advice (45%), and grants for taking on trainees (51%).

This reinforces the recommendations made in our 2019 Annual Review that apprenticeships should be a priority focus for Government in 2020, alongside schemes to ensure opportunities for our younger generation in all forms of employment. 

The recent Government announcements to increase apprenticeship opportunities are therefore strongly welcomed, including the ‘plan for jobs’ and the developing ‘T-level’ qualification. The Top 100 Apprenticeship employers¹⁴ is an encouraging step, but we feel this needs to be adjusted and enhanced to avoid the impression that large established companies or public sector employers are the only route to apprenticeships. We believe that this listing should be based upon a relative measure, such as growth rate, or split into categories that are more reflective of the businesses that are providing the most dynamic and long term routes to employment and skills.

As part of our enabling our younger generation to connect to job opportunities, the Kickstart scheme is also an important initiative¹⁵. To have maximum impact it needs to be simple for scaleups and growth businesses to access. At present under the Kickstart scheme a minimum of 30 positions needs to be taken on. This means a number of businesses who wish to use it will need to leverage aggregation options and that is why the ScaleUp Institute is partnering with Greater Manchester’s Growth Company to offer a nationwide solution to scaling businesses wanting to support the scheme.

Above all, Government and the local ecosystem must ensure to link these schemes to dynamic local scaling firms that are actively looking for workers as they grow – and not just large corporates. 

The initiatives that Government has announced on skills must also represent a positive and enduring engagement for those young people who make use of them. This is particularly so when one assesses the “life satisfaction” ranking in PISA. It should be seen as of some concern that UK students scored significantly below their international peers in terms of reported “life satisfaction” ¹⁶. As we encourage students to excel in the things that they study, we also need to ensure that we are giving students the best start to their careers in terms of outlook, confidence and wellbeing, and we will monitor this indicator across coming years.

• Enabling and Resourcing Teachers

Teachers remain at the heart of our future skills pipeline, and their time is a constrained resource made even more challenging this year by Covid-19. As we reported on last year, we support the shift towards a new educational framework to assess pupil employment prospects. Writing in March 2020, Ofsted emphasised that whilst inspectors are now focusing much more on the opportunities that pupils get to interact with external providers and employers, beyond work experience, it is still the case that often this guidance starts too late¹⁷. But progress is being made. As a result of the work of the Careers & Enterprise Company 3.3 million young people are now engaging with employers regularly – a substantial improvement on five years ago. The recent expansion of Career Hubs also means that more than 45% of state sector schools and colleges are now covered.  These Hubs are built on dynamic partnerships of schools, colleges, LEPs, local authorities working with local employers – providing young people with the opportunity to connect closely to local skills and economic needs. We have noted that there has been some progress in enabling access to the National Pupil Database for the tracking of impact through the Secure Data service, which is a positive step¹⁸.

In the current crisis the CEC ¹⁹Careers In Context 2020 Guide provides useful guidance on how wider institutions can become involved in supporting young people in the world of work. We also continue to recommend the utilisation programmes such as Barclays LifeSkills, Founders4Schools, and Workfinder.

We recognise that there are practical limitations – not least the ongoing demands on a teacher’s time – to the number of institutions, programmes and separate goals that can be mandated for teachers to deliver without impacting in other areas of education, even more so due to Covid-19. We continue to emphasise the need to ensure that teachers are fully supported and resourced to deliver against this new framework. 

• The Role of Universities and Business Schools

As identified in the drivers of scaling, universities have a key role in a growth focused ecosystem. As highlighted in the Logan Review²⁰ – published in August and looking at the Scottish tech ecosystem in particular – the provision of specific entrepreneur-focused training to University leavers could help to support the number of University spin-outs and the overall growth ecosystem. In this regard, it is also important to have an integrated approach to over-arching skills needs, with a clear route for international students studying in the UK to move into the world of work – either providing the expertise learned in the UK to growth businesses in the UK or starting new enterprises of their own. 

Scaleups consistently emphasise a desire to do more with universities themselves, not just their students. We would encourage more university ‘Entrepreneurs In Residence’ initiatives as well as the placement of academics themselves into scaleup businesses. We feel that Innovate UK – and UKRI as a whole – has a role to play in working to encourage better connections between academic institutions and scaleup businesses. As our survey shows, access to universities and business schools and the opportunity to collaborate with them remains a key opportunity for scaleups, but unfortunately only 3 in 10 report being able to do so. There is substantial potential for improvement.

The greater use of ‘Entrepreneur in Residence’ positions, and enhanced links between faculties and business schools attached to the same institution, should be encouraged. Innovative courses such as Liverpool’s Scaleup MBA, Strathclyde’s GAP programme (which we have endorsed this year), Aston’s Growth Centre, Nottingham Trent’s UpScaler programme, The Henley Business School Angel Academy or Newcastle’s Scale-Up Leaders’ Academy with Entrepreneurs’ Forum are also each making progress. However, many of these are funded at least in part by European Structural Funds (ERDF). As we move forward and build a growth-focused recovery, it is essential for such programmes which are having an impact to be maintained with the right funding levels from alternative sources.

THE INTERNATIONAL IMPERATIVE 

Scaleups are looking for the best talent to help them on their growth journey. Whilst 95% of scaleups employ people from the UK, they also employ a diverse range of talent from overseas, with 62% employing people from the EU and 38% employing people from outside the EU. It is imperative that access to this talent is maintained to provide access to the skills needed to fuel the growth of UK companies.

We continue to recommend the creation of a Scaleup Visa to help fast track the talent needs of scaleups. Further, we believe that this should be closely aligned to the needs of local scaleup ecosystems. Local institutions, with direct engagements with high growth businesses are best placed to be able to recognise the developing skills of local area and should be enabled to act as sponsoring institutions. We also believe that these institutions should work directly with universities to ensure that the international talent that we train in the UK can also benefit our home grown businesses.

International graduates are 77% more likely to do business with the UK as a result of studying in the UK; 81% intend to build professional links with organisations in the UK, and; 77% of postgraduate research graduates intend to collaborate with the UK for research purposes²¹.

With the UK in the process of redefining its relationship with the EU, it is more vital than ever to emphasise our role as a destination for global talent excellence; we must not pass up the opportunity to harness these resources towards our scaleup firms. We recommend greater use of educational alumni networks within scaleup ecosystems as part of an integrated approach, alongside a locally rooted scaleup visa system.

SUMMARY

Talent, including international talent, is fundamental for scaleups if they are to continue as drivers of innovation and economic growth. The Covid-19 crisis has put a spotlight upon the importance of re-skilling and provided a substantial cultural shock through restrictions on businesses. But this has, in part, accelerated some of the changes already expected across a range of different industries – particularly in relation to digital literacy and the increased adoption of automated systems. It is now vital for Government and educators to fully engage with the skills that will be required for the ‘new normal’. 

The skills requirements of our scaleup businesses should be at the forefront of planning if we are to safeguard future economic prosperity.

A new drive to build partnerships and collaborations between educators, businesses and government is necessary to resolve the UK skills gap. We need to build on what works – such as the Careers & Enterprise Company model – and opportunities for wholesale engagement with the current and next generation workforce such as Kickstart and the National Skills Guarantee must not be wasted. We should continue to build stronger connections between educators and the scaleup business community, and further strengthen partnerships at a local level including the ability to deliver fast-track visa applications.

RECOMMENDATIONS

1. CONNECT TALENT – DEVELOP A SCALEUP VISA AND ENSURE TALENT SCHEMES ALIGN TO SCALEUP NEEDS. MANDATE COMPUTING IN SECONDARY EDUCATION

A ‘Scaleup Visa’ should be made available in communities where there are 100+ scaleup companies to enable scaleup leaders, across all sectors, to recruit the staff they need to increase their capacity to grow. The Government should make the international skills needs of scaling businesses a priority. Local authorities, education establishments, advisory and finance companies should be able to be sponsors of such visas. Ecosystem players should work closely to connect university leavers with these schemes to ensure that graduate and postgraduate talent educated in the UK has every chance to contribute to the growth and skills needs of regional scaleup businesses. A fast-track process should be acted upon on aligned to Recommendation 1 above. 

The National Skills Guarantee, Apprenticeship, and Kickstart programmes should be made as accessible to scaleups as possible. As recommended in the Logan Review, Computing Science (Computing in England and Wales) should be a mandated subject from the first year of secondary school with private sector experts and entities leveraged in its delivery on a more coordinated basis and entrepreneurship should be fostered. Government should use their convening and promotional power to ensure that students at schools, colleges and universities come into contact with scaleup business leaders leveraging such entities as Careers Enterprise Company.