Talent and skills

Access to the right skills is essential to growing a business, and scaleup businesses remain as talent hungry as ever in 2021. This year 66% of scaleup CEOs rate Access to Talent as very important or vital to their growth, with 33% rating it as a top priority. This shows that whilst it is the second most important issue overall, for those that do see it as a barrier, it is of critical importance to their growth.

As we noted last year, ensuring the right skills are available for scaling businesses must be at the heart of plans for recovery, and a foundational element of the levelling up agenda. It is therefore extremely welcome that in this year’s Spring Budget the Government announced – one of the key recommendations of the ScaleUp Institute from outset – the introduction of a Scaleup Visa with the explicit goal of enabling the timely acquisition and retention of world class talent from abroad with 1 in 2 scaleups seeing access to this as vital / very important to their growth. We are working actively with the Government on its development and will closely monitor its delivery.

The announcement in the Autumn budget of a network of overseas Talent Hubs with the first in Silicon Valley and Boston in the US, and Bengaluru in India with the plan to expand to six countries by 2023 are also positive. These should work hand in glove with the Scaleup Visa system, and also engage closely with scaleups themselves through emerging Account Management structures to ensure that there is a clear view of which skills are in greatest demand, allowing these needs to be met quickly. We also recognise the important role that the Innovation Strategy, and sector specific publications such as the Life Sciences Vision have for the future development of the right skills pipeline. This includes the ability to be agile in supporting the export strategies of companies, with the right skills increasingly critical to enabling market access: 

We must also nurture the right home-grown talent to ensure that we have a robust domestic skills pipeline with scaleups employing school leavers, graduates and post graduates. While this work should start at school, an ability to adapt to an evolving workplace will be necessary throughout careers. That means there is still work to be done to ensure that school leavers have the best opportunities in a fast changing modern job market, particularly ensuring that they all have a solid grounding in the basics of computer programming and use. But life-long learning will also be an ever more important part of the world of work. The National Skills Guarantee and the kickstarter scheme announced in 2020 each have an important role to play here. As do but it is also critical to tackle some of the core imbalances at play in the current system. 

WHY TALENT MATTERS:

DOMESTIC AND INTERNATIONAL TALENT IS KEY TO GROWTH

The Covid-19 pandemic caused substantial disruption to the UK job market. Following a sharp contraction during the lockdown period which we reported on last year, job vacancies now stand at 1,283,724 vacancies – a remarkable 103% increase year on year – with vacancies now higher than those recorded in October 2019.

This impact was felt globally, with the equivalent of 255 million full-time jobs, an estimated $3.7 trillion in wages and 4.4% of global GDP lost during 2020 according to the World Economic Forum. The UK Governments substantial intervention to support businesses and jobs during the pandemic has been an important feature of the UK business landscape over the last year, specifically support for job retention through the Furlough scheme which we know 46% of scaleups used, alongside wider support such as loans and grants (53%). 

UK scaleups employ 3.2 million people, and despite the challenges faced, we know that even during the height of the pandemic, job creation was the second most cited reason why scaleups reported for raising money. This drive for job creation is continuing – and we know that an impressive 8 out of 10 are planning to grow their workforce in 2022, with 1 in 2 expecting to grow their workforce by more than 20%.

Scaleups have a diverse range of talent needs, which means they value the right talent at all levels. They employ a mix of graduates (76%), post-graduates/PhDs (49%), and school leavers (37%). 70% offer either apprenticeships or work experience, while one-third (37%) offer internships. 

As well as being engines of job creation at home, scaleups also have notable numbers of employees from overseas. 47% employ staff from the EU and 36% from outside of the EU. This data shows just how critical the Scaleup Visa will be in aiding fast-growing businesses with half of scaleups agreeing that it is vital for them to have access to such a fast track visa. The recently announced international Talent Hubs will also be important in this regard.

Talent is often a gateway to unlocking new markets through cultural knowledge, or finding the right finance for a businesses scaling needs through experience or technical expertise. NEDs, PHDs, graduates and those undertaking apprenticeships all play an important role in businesses that are scaling. The International Graduate Outcomes survey from 2019 (updated in 2021) shows that 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 purposes. With the UK still in the process of reshaping 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. Alongside the scaleup visa, we also recommend greater use of educational alumni networks within scaleup ecosystems as part of an integrated approach. If curated effectively, these networks can augment wider market access efforts such as that seen with the ‘Global Scot’ and ‘Global Welsh’ programmes.

THE WAY AHEAD – RELEASING AND REALISING THE POTENTIAL

Both soft and hard skills continue to be important to scaleups. In our survey this year, we further explored some of these issues and found that the top skills being sought were social skills (75%) followed by technical skills (66%). These were followed by management skills (60%) and business skills (58%).

This combination of technical and social skills is increasingly apparent, with a certain level of technical literacy generally expected or required. Our survey reflects this through the continued drive of scaleups as early adopters of technology and digitalisation showing that 4 in 10 are planning greater use of AI in 2022, 3 in 10 planning to use big data, and 1 in 5 looking at greater use of robotics (21%). As in previous years, the most desired future skill by scaleup leaders continues to be critical thinking.

This shows that, alongside the increasing use of AI and other technological solutions, customer service, relationship building and problem solving are driving these innovative businesses. However, these are increasingly expected to be paired with a level of core technical competence. The UK showed improvement in Maths in the latest PISA rankings, though it has seen a lower increase in Science and Reading.

Across this year we undertook a detailed assessment of the talent needs of scaleup businesses, which shows the unique spread of skills that they require, and the broader challenges that they have in recruiting the right talent. Scaleup businesses are often slightly “outside the norm” and this impacts on recruitment. All of those businesses which participated in detailed interviews had found an opportunity to enable them to grow quickly, whether due to having an innovative product or approach, a sector specialism or being able to take advantage of a change in the business environment. However, being a bit “different” means that they also have requirements of staff and leaders that are not standard. They need people with both the right skills and the right attitude to work in a fast growing business and they may need colleagues who can work in a different way or with a different remit. This can make recruitment more of a challenge, and it shows the huge importance of being able to seek the best talent from overseas to work within these innovative business models needed. For instance, these firms often wanted a blend of specialist skills, such as a ‘tech’ specialist who can also undertake sales activities, or an HGV driver who can also operate wider complex technical equipment. These more specific requirements immediately narrow the pool of available recruits. The businesses also reported that many of those leaving school or further education were not ‘business ready’ with a further set of skills still for them to learn.

UPSKILLING AND LIFELONG LEARNING

While the evolving growth opportunities, with blended skills and engagement with emerging technologies, are fuelling a huge and increasing demand for digital and technology roles, the UK is facing a technology skills gap – particularly in relation to computer / digital literacy – which threatens to widen without further urgent combined action to resolve it.

There is a wealth of evidence to this effect. Indeed as the recent Kalifa Report (February 2021) observes, “The UK’s education system provides a solid foundation [..but…] there appears to be a mismatch between the skills and knowledge being delivered and the needs of our society. This is an issue which spans both further education and higher education.” The Learning & Work Institute goes further, stating the UK is heading towards a “catastrophic” digital skills shortage. It reports that the number of young people taking IT skills at GCSE has fallen by 40% since 2015. It also found fewer than half of UK employers believed their newest recruits from education had the necessary advanced digital skills. 60% of businesses expected to become increasingly reliant on such abilities over the next five years, while 76% feared the lack of digital skills would hit their profitability.  The Report on Jobs, issued in May 2021 by the Recruitment & Employment Federation (REC), in conjunction with KPMG, states that the overall growth in UK job vacancies is at its highest since 1998, and in particular, “The steepest increases in vacancies were seen in IT & Computing and Hotel & Catering.” 2021 has seen a 10% increase in the numbers studying Computing Studies, but this is from a very low base. The Industrial Strategy Council publication in June 2020 also noted the relative weakness of UK skill sets in the projected workforce over the next ten years across all disciplines. It stated, “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”. 

As we head out of the global pandemic with the aspiration to build back better, it is welcome that there have been a raft of initiatives in this area with work currently underway to deliver more relevant skills as set out in The Skills for Jobs White Paper of and wider policies, including the National Skills Guarantee, T Levels, Kickstart, Institutes of Technology and apprenticeship programmes.

However, we believe that even more robust focus and effort needs to be put on Digital, Computing and Technology skills if we are to respond to the shortage we already face, as well as to achieve our ambitions laid out in the recent R&D People and Culture Strategy which looks to build a stronger R&D focused talent base.

UNLEASHING THE NEXT GENERATION:

RESOURCING TEACHERS AND ENABLING THE SKILLS OF THE FUTURE

Getting our UK Talent Strategy right across the spectrum – from school to industry – leveraging work experience, internships, apprenticeships and lifelong learning – will support the growth of our broad-based economy and burgeoning scaleup community. This is a job for industry and employers as much as government and educators.

Teachers remain at the heart of our future skills pipeline, and their time is a constrained resource made even more challenging during the pandemic Covid-19. As we reported on last year, we support the shift towards a new educational framework to assess pupil employment prospects. We also believe that they need to be fully resourced to meet the emerging needs that their pupils will have as the world of work rapidly evolves.

For instance, in a recent Ofqual research paper which looked in detail at the challenges of offering certain subjects for examination, one independent school observed : “We absolutely feel like our students should be learning to do computing and that that should be on offer, but computing A level, statistically, … it’s just where everyone crashes and burns… . So we don’t offer computing and I think having talked to [other local schools] they take exactly the same position, it’s too difficult.”

Across the UK there are impressive examples of efforts being made to fill technical and digital skills gaps. These include innovative programmes from the private sector working jointly with the Government, such as Google Digital Garage, Multiverse, Workfinder, Raspberry Pi, Digital Boost, Microsoft’s Digital Skills hub, the Careers and Enterprise Company and the Digital Skills Group of the British Computer Society. 

However we believe that there are three specific priorities which need to form the foundations of a more comprehensive forward skills strategy, knitting together much of the good work that is already underway – but with a laser focus on delivering the talent required to support companies that are looking to grow in the short term, and ensure that we can continue to grow and attract world leading businesses in the long term. 

Priority 1: Raise the Status of Computer Science in School either through compulsory examination or accreditation – recognising these skills as the critical modern language and the bedrock of STEM capability

Priority 2: Boost careers strategies – providing further work experience and internships in mainstream education and expanding opportunities with apprenticeships and Kickstart schemes 

Priority 3: Expand long-term initiatives to support Lifelong Learning and adult reskilling to service future economic needs and to give new opportunities for advancement to those outside formal education

1 – Raising the status of computer science

Computer science is not widely taken as a subject in the UK. The Computing GCSE ranked 17th with only 79,964 taking the subject in 2021. These numbers are also low at A-level, with Computing the 18th most popular subject: 13,829 papers were taken. Whilst this was up by 11% in 2020, this is a very low base. By comparison, 71,235 students took Psychology, 42,091 Sociology and 18,473 Politics.  

We see the same trends repeated in Scotland where numbers have either dropped or remained static. In Highers (GCSE), the number of students taking Computing Science has fallen from 4,454 in 2016 to 3,377 in 2021, making it the 16th most popular subject. At Advanced Higher (A-level), 565 papers were taken in 2021, just seven more than in 2016.

As well as falling short of delivering  the numbers of digitally-literate students required to drive the future economy, we also see a strong gender imbalance in the study of Computer Science. Female students account for just 20.7% of those taking GCSE, which reduces still further at A-level to just 14.7%. This is a significantly lower proportion than exists across other STEM subjects. In Northern Ireland, only 69 girls took the GCSE in 2021; in Wales just 60 girls took A-Level Computing in 2021 and in England, girls made up just 14.7% of the 2021 A-level Computing cohort. Although this represents a slight rise since 2018 and 2019, when it stood at 11.7% and 13.2% respectively, it is still surprisingly low.

To resolve these issues we strongly believe that computer science should be elevated in schools and propose a number of options to achieve this.

There is substantial debate on whether Computer Science (encompassing digital and technology skills sets) should be a mandatory subject for examination. We believe that there is merit to this proposal from the evidence of the impact of introducing other compulsory examination subjects.  Putting a level of examination in place for all students up to Key Stage 4, and Computing and making it more widely available at Key stage 5 (A Level and Scottish Highers) would demonstrate its equal importance as Maths or English Language. 

The compulsory subjects of Maths, English Language and Science: Double Award GCSEs are currently each studied by ten times as many pupils as the Computing GCSE. The introduction of science as a compulsory subject in 1989 dramatically increased science literacy. A study conducted in 2001 showed the average test score of students who had experienced compulsory school science from the ages of 11 to 16 to be significantly higher than those who had not. This has arguably trended through to our PISA rankings in these subjects, which have been incrementally improving since the global study was begun as discussed above.

Based upon this evidence, options for intervention at this level seem logical:

A – Make Computer Science a mandatory GCSE Subject on a par with Maths, Science or English Language. This would ensure that teachers and schools were given appropriate funding to fully teach the course. We know that some schools have flagged they see the importance of Computing, but can struggle to justify the resources to teach it given low uptake, and push back given it is seen as a ‘hard’ subject which may depress pupil grades in their elective subjects.

B – Include a compulsory computer science module within all mathematics assessments at GCSE. The core skills of Maths and Computer Science strongly benefit one another with numeracy, algorithms and data essential components in programming.

C – Encourage the development of a third party accreditation recognised within education, which can also be trusted by employers, such as the recognised grades for music (which includes exams on musical theory), which are widely undertaken, or within some modern languages such as the HSK qualification for Mandarin. 

2 – Boosting careers strategies at school and engaging with Universities

Pupil engagement in the fast moving world of work is ever more essential, so that students can benefit from the practical experience they need for emerging job roles, such as those listed above (.NET developers, Software Architects, and Software Engineers) as well as across AI and Big Data, creative and design sectors, and a vast array of positions in the broader workforce. 

Learning these skills from as young an age as possible will significantly raise children’s self-belief in their ability to master them and help to break down current stereotypes about their value. This will involve changes to the current school curriculum, but, while these changes are challenging, they are essential in providing the necessary skills for young people. 

Much has been done over recent years to build on the connection between schools and employers. This includes the government’s recent announcement of 2,000 new AI scholarships, as part of its new AI strategy, as well as the 2018 Careers Strategy and most recently in the Skills for Jobs: Lifelong learning for opportunity and growth white paper (published January 2021). 

Scaleup leaders continue to express a desire to engage with the emerging generation. They are twice as likely as non-scaleups to offer apprenticeships, internships and work experience. This presents an opportunity for government and educators to link students with dynamic local scaling firms by utilising the existing system of business encounters. These businesses are actively seeking workers as they grow and, as highlighted, are at the forefront of innovation. Students will not only improve their technical skills but also learn about entrepreneurship in such environments. 

A closer alignment between education and scaling businesses would be of mutual benefit, as it would also help to meet the talent demands of scaleups. It will be essential to continue to foster greater levels of collaboration between industry, universities and business schools in order to achieve this integration. Universities have a key role in the UKs growth ecosystem both as educators, and as a breeding ground for some of our most innovative scaleup businesses which have been spun out of them. However, as our survey this year shows, collaboration rates between Universities and scaleups remain low with 4 in 10 noting they have done so. This suggests more can be done, and we recommend greater use of Entrepreneurs in Residence to foster these connections as part of broader efforts to include business relevant modules in subjects of all kinds.

To be effective, this shouldn’t just mean requiring a Physics student to take a business module, rather they should have the opportunity to take a business focused physics module, which will show them how the work they are undertaking would be applied in the world of work. 

This kind of blended approach is important for the health of the whole UK growth ecosystem, not just the talent needs of scaleup businesses themselves. As we note elsewhere, the right skillsets and talent are critical within wider areas of the ecosystem – especially finance. As we discuss in detail in our Chapter on Access to Growth Capital, a pipeline of analysts with the right skillsets to deploy capital effectively are critical to enabling the right finance to be available to companies as well. One of the routes to doing this is ensuring that universities and business schools are offering courses which facilitate these roles such as those at the University of Pennsylvania and the University of California, which offer a Life Science & Management degree programmes that explicitly include placements at biotech companies and investment companies as part of the learning process.

Careers Hubs

Delivering clear results at school and for students at university will require the scaling up of careers hubs and work encounters and platforms, which can ease the connection of students to the workplace. Linking students with scaleup employers to facilitate internships and work experience will give them a clearer picture of the skills they will need to put to practical use on a day to day basis in the world of work.

Such industry and schools partnership can be facilitated by the continued rollout of Careers Hubs, overseen by the Careers and Enterprise Company, as proposed in Skills for Jobs. These Hubs are built on dynamic partnerships of schools, colleges, enterprise partnerships and local authorities working with local employers. They provide young people with the opportunity to connect closely to local skills and economic needs. 

The recent expansion of Career Hubs means that more than 65% of state sector schools and colleges are now participating. 

It will be valuable to learn lessons from Careers Hub Incubation projects (HIPs) that are designed to test ‘what works’ in careers education, using the Careers Hub model. One example is the HIP in Lancashire which aims to increase interest in digital careers and take up GCSE science by girls with the ultimate purpose of boosting the number of young females entering the digital workforce. Called Digital Futures, it will focus on digital careers interventions with Y8 girls, amplified with teacher CPD, to test whether this increases GCSE Computer Science uptake by girls in secondary schools in Lancashire. Eight Lancashire schools identified as having high quality GCSE Computer Science provision but low take-up by girls are involved . The project will deliver high quality, locally tailored Digital/STEM related careers activities at varying intensities. It will be tracked by input type, intensity (how much each girl receives) and cohort to identify which blend of activity has the greatest impact for each cohort. 

In connecting young people with the world of employment, the work of the Careers & Enterprise Company has been crucial and merits continuation and expansion. 3.3 million young people are now regularly engaging with employers – a substantial improvement on five years ago. Existing private and third sector programmes, like F4S, digital brokerage services like multiverse, speakers for schools, founders4schools, workfinder, and springpod, all can be leveraged further to remove friction and costs, and more easily connect students and scaling employers.

While this progress is encouraging, there is still more that can be done. Career Hubs should be rapidly expanded to reach full coverage in the coming year. These hubs and platforms can provide the kind of local brokerage service necessary for engaging with fast growing entrepreneurial business, as well as more established firms. This will provide students greater exposure to the range of skills and experiences available across the world of work, and this level of engagement will be extremely beneficial for pupils and students who have left education during or just after the lockdown periods of 2020 and 2021. As we noted previously, 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 step, and should be fully utilised to ensure that these are as effective as possible for students that have had to cope with the current pandemic.

Employer encounter targets and digital internships 

Students need to experience work placements as standard throughout their further and higher education. Writing in March 2020, Ofsted emphasised that while inspectors are focusing much more on the opportunities for pupils to interact with external providers and employers, beyond work experience, it is still the case that often this guidance starts too late. 

We recommend that targets for employer encounters, focused on Real World Learning, should be more ambitious and raised to three per year (one per term) and that at least two of these be with local scaling firms. Encounters can occur through “remote” online channels but must provide a meaningful project-based encounter.

Work experience embracing Real World Learning, project-based learning or learning by doing provides clear examples of how children can be immersed in the fast pace of technological advancements, which affect almost every aspect of the job market..These interactions, including having companies present to students and provide project activities, are highly beneficial to pupils, as they allow for a better understanding of the subject and the range of roles available to drive wider interest beyond even more formal Computer Science roles.

Encounters can be further, facilitated as highlighted above, through Careers Hubs and platforms. This requires that scaleups be connected to these and that efforts are made to align these to the scaleup community as well as broader initiatives.

This increase in meaningful school age work experience has the potential to take advantage of the current trend in Digital Internships. These could provide the possibility to overcome traditional geographic barriers that separate children from internship opportunities, as well as broader divides which can be experienced by children from disadvantaged wards or from BAME backgrounds. 

The Lloyds Essential Digital Skills Report 2021 indicates that Ethnic Minorities are more likely to have Foundation Level digital skills than the UK average, 90% as compared to 81%. And 15% of the digital tech workforce in the UK are from BAME backgrounds, which is proportionally 2% higher than the average across the total UK workforce. However, it is important to ensure that children from all backgrounds have access to appropriate opportunities to apply these in the world of work, as part of their education with regional factors evident in relation to placements and internships. 

A remote form of work experience could therefore remove some of the place-based challenges, allowing children to gain valuable experience at a reduced cost on a more equitable footing. Though these developments are still in their infancy, there is also the potential to build upon them by providing digital mentors for older students, which could support their decision making and also, if the mentors are from STEM/Computer science backgrounds, broaden the students’ horizons.

The role of Careers Leaders in schools is also important. Further investment in training for careers leaders has been proposed, which should include expanding their knowledge and understanding of the skills needs of scaleups and the opportunities they provide for pupils. Teach First is an example of such a programme; participants reported significant improvement in their knowledge or careers provision and available resources as a result of the programme.

A further drive to build apprenticeship partnerships and build upon the Kickstart scheme should be a key focus of government strategy to develop post 16 technical skills. The Top 100 Apprenticeship employers is an encouraging initiative, but it needs to be adjusted and enhanced to avoid the impression that large established companies, or public sector employers, are the only route to apprenticeships.

3 – Lifelong Learning

While a strong educational framework at Key Stages 3 and 4 and more effective careers strategies are important, the role of lifelong learning cannot be overlooked in providing the skills for growing businesses. As highlighted in the Skills for Jobs white paper, 80% of the workforce of 2030 are already in work today. 

To meet the pressing needs of UK businesses, it is important to retrain people already in work to develop increasingly relevant technology skills today. The CBI estimates that 90% of the UK workforce will need to be reskilled by 2030. 

The Skills Toolkit campaign is an essential plank for digital skills, which has been provided by the Government, and will need to be deployed in concert with the broader Plan For Jobs in order to maximise its effectiveness. 

This encompasses both: the National Skills Fund, announced in September 2020 which provides free college level education to adults without an A-level or equivalent; and the Government’s £95 million commitment  to its Lifetime Skills Guarantee, which pays for adults who have not already achieved a Level 3 qualification to retrain in a number of areas, including technology.

Institutes of Technology (IoTs), will be vital to the success of reskilling demands, alongside the expansion of Digital Skills Bootcamps, which build on successful pilots in Greater Manchester and the West Midlands, as well as looking to support initiatives that seek to provide small businesses with essential digital skills (such as the free mentoring provided by Digital Boost).

Opportunity must be open to everyone. Teachers looking for new challenges, for example, could retrain in digital to enhance their existing skillset and be fast-tracked back into the classroom once qualified. 

Large numbers of staff within the IoT system are being recruited as dual professionals – individuals with current experience in industry becoming teachers and mentors for learners. Currently this is being done by each IoT on an individual basis and relies on the goodwill and flexibility of employers to release staff. Government should continue to encourage companies to share their most knowledgeable employees.

Flexibility is key to success. There must be a range of options available to those in need of upskilling, with delivery offered both in person and online. Programmes should include Boot Camps, short, medium and long-term courses, as well as evening classes. It is also essential that these programmes reach all areas of the country to ensure that future skills, which are consistently in demand by scaleup businesses, are available in every community. 

SUMMARY

The right skills and talent are the gateway to growth for scaleup businesses. It is extremely positive that the Government has announced a Scaleup Visa in line with our recommendations. We will closely monitor the progress of this over coming months ahead of its planned launch in sprint 2022. 

Ensuring we have a robust domestic skills pipeline is also critical. As we have set out above, there is an emerging skills gap in the UK: particularly in relation to computer science and digital literacy and it is important for concerted action to be taken in this area. To this end, as we outline above, we believe that computer science needs to be elevated within schools at Key Stage 4. It is also important for the initiatives that are already underway to improve talent are connected and well aligned to the ultimate goal of improving the core skillsets of our workforce to enable growth over the long term, working together with teachers and educators to ensure that they have the resources and skills they need to effect the change we want to see.

To do this we need to build upon what works, such as the Careers and Enterprise Company Model, and ensure that Universities and Business Schools are well connected to emerging hubs and clusters at a local level. This will help businesses and graduates to find each other and fill roles, but it will also help businesses to access broader university resources and explore collaboration options.