Talent and skills

Access to talent is a Global Challenge for businesses and it continues to be a specific challenge for UK scaleup leaders.

7 in 10 scaleup leaders rate access to talent as a vital/important factor in their future growth, with 6 in 10 ranking it in their top 3 challenges (62%) behind access to markets (73%) the same as last year. 1 in 4 rank it as their number one priority, ahead of access to Markets.

Understanding this talent challenge will be a key part of unlocking UK growth, and it requires policy initiatives to address our domestic skills pipeline, as well as ensure that we can attract the best talent here from abroad as well.

UK scaleups employ more than 3 million people across the UK, and we know that they are keen to employ more, with 8 out of 10 planning to grow their workforce in 2023. Scaling businesses (of which there are 16,700) employ a further 1.4 million people, as these companies progress on their growth journeys, they will also be seeking highly skilled talent as they develop new products and services and enter new markets.

Last year, we reported a record 1.3 million job vacancies in the UK, whilst this number has reduced to 1,104,824, for November 2022 (a year on year drop of 15%), there have been more than 1.2 million vacancies for six of the last twelve months, and approximately 1.1 million vacancies in each other month. Moreover, whilst the record high previously reported was fuelled by the external factors caused by the pandemic, lockdown and furlough challenges, we are now witnessing a prolonged period of talent shortages, which are coupled with wider inflationary pressures impacting businesses. In 2020, the World Economic Forum predicted that AI and Automation would displace 85 million jobs globally, but create 97 million new roles by 2025 as humans, machines and algorithms increasingly work together. There is increasing evidence to suggest that many of these jobs are already emerging, and with them new skill requirements, and different focuses for re-skilling.

BOTH DOMESTIC AND INTERNATIONAL TALENT ARE KEY TO GROWTH

As significant UK employers, scaleups are hungry for talent at all levels. They employ graduates, post-graduates and school leavers, and offer experience through internships, work placements and apprenticeships. Scaleups are also significant employers of international workers with 4 in10 (42%) employing staff from the EU and 3 in 10 (36%) employing staff from outside the EU. Of those currently employing overseas staff, 6 in 10 say it is very important that they continue to hire talent from the EU and over half say the same about hiring overseas candidates from countries outside the EU.

With the importance that scaleups place on talent from all sources, including from overseas, it is hugely important for the Scaleup Visa to have been launched this summer, utilising the scaleup definition to ensure that companies are able to access overseas talent to fuel their continued growth. The potential to expand this to companies on the verge of growth, and those scaleups who are known to Government and the wider ecosystem through participation in key programmes, but are less visible, should also be considered. This would mean drawing upon data to identify companies on accredited Leadership Development courses, such as the Goldman Sachs 10,000 Small Businesses UK programme, those connected to exports such as trade missions run by DIT, or UKEF products and wider innovation programmes such as Innovate UK Edge, to form a clear picture of companies that are eligible. The Overseas Talent Hubs announced alongside the Visa in 2021 could also play a key role in bringing the best talent here to the UK, helping to develop a critical mass of expertise in key sectors and emerging clusters and hubs. We therefore believe that these skills hubs, the scaleup visa and wider initiatives to foster clear hubs and clusters need to be well connected within local ecosystems and nationally. They should also be aligned to emerging Relationship Management Models so as to ensure that scaleup businesses remain at the heart of these programmes as they are delivered in practice.  

Whilst overseas talent is a vital part of scaleup growth, above all it is essential to ensure we have a robust domestic talent base, with the right fundamental elements taught at the right stages, and individuals afforded every opportunity to gain skill sets that will be valued in the workplace – especially in a fast paced world, where future skills disciplines are likely to evolve several times over the course of an average period of formal education, or over the average employment of any employee.

This means working closely with teachers, academics and the private sector to bring all resources to bear in a way that can give young people, school leavers, graduates and people looking at a career change later in life every opportunity, connecting them with the businesses that need them to fuel their growth. We have previously reported in detail upon the digital skills needs of scaleup businesses in our Levelling up through digital, computing and technology skills paper published earlier this year. This notes the critical importance of ensuring that we have a base level of digital literacy, in order to ensure our workforce is able to develop the blended skill sets that scaleups need. We are pleased to have been part of wider initiatives which are working in this area, including Future Dot Now and also engaging with the Digital Skills Council – the work of which is all critical to ensuring people – no matter what level of education they are at – have the right skills to access the job opportunities that are available. 

The Local Skills Improvement plans set out in the Levelling Up White Paper are still in development, but have the potential to play a key role in connecting local business skills needs with wider education and skills strategies within those areas. We will monitor the progress with interest, and note that they may also provide a useful conduit for further efforts to bring entrepreneurship and innovation into schools, and we believe they should be closely connected to broader local scaleup plans and priorities, as developed under local Strategic Economic Plans and the Local Industrial Strategy Frameworks.

BUILDING A ROBUST DOMESTIC SKILLS BASE

Whilst digital skills are now a key part of many roles, and scaleups are no exception, we have consistently found that scaleup leaders are keen for their employees to have so called ‘softer’ social skills, and management abilities. In our survey, we see that 72% are looking for social skills and 59% are looking for management capabilities, with technical skills following on 55%. In particular, we can see that they are seeking employees who can demonstrate effective people management, resilience and flexibility as well as staff with the ability to use their judgement and make decisions, with critical thinking a consistently important skill requirement for them. This is very much in line with the future skills identified by the World Economic Forum.

6 in 10 scaleups are confident they will be able to find people with the ability to work with and adapt to new technology, and whilst this should be higher, it is important to note that only 5 in 10 believe they will be able to find individuals with the right softer social skills.

The latest PISA scores – as we reported last year – show that in addition to digital and social skills challenges, there is still work to be done to ensure that school leavers have the right competencies for the world of work, with the UK slightly improving in maths, but lagging in science and reading. When it comes to the curriculum, 5 in 10 scaleups would like to support its future development to ensure relevance to current business needs and are keen to see the inclusion of entrepreneurship modules, with four in ten seeking clearer forms of accreditation for digital skills.

There are a number of important initiatives aimed at increasing the digital capabilities of the UK workforce including 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, as well as the Digital Skills Council and broader initiatives such as Future Dot Now, which brings together private sector players to galvanise action in this area. Institutes of Technology (IoTs) will also be an important part of the reskilling journey alongside the expansion of Digital Skills Bootcamps, which build on successful pilots in Greater Manchester and the West Midlands.

However, from the perspective of both individuals and employers alike, there is a lack of clear coordination across this space, and it is hard to categorise the different skills frameworks, and therefore the different skills gaps, faced by businesses, and provide individuals with knowledge about which path they may wish to take. As we suggest in our Levelling Up Through Digital, Computing and Technology Skills paper, the development of accreditation for digital skills along the lines of music accreditation may alleviate this. By creating a clearly understood level, which people from ages 6 to 60 and beyond, can gain and utilise with confidence at school, home and in the world of work, it will be easier for individuals and companies to understand talent needs and opportunities. From a policy perspective, it will also be simpler to pinpoint where the gaps are, and how different institutions, such as the National skills Academy, need to lean in to provide additional support.

Digital internships could also 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. 

We urge the consideration of these avenues as the Government rolls out T Levels and aims to deliver at least 15,000 high-quality industry work placements by 2024/2 under its digital strategy. We look forward to Ofsted’s report into computing education, due to be published in 2023, and the actions that will flow from the findings to close the digital skills gap.

RESOURCING TEACHERS AND BUILDING WORK-EDUCATION LINKS

Many scaleup leaders tell us that they often discover their new recruits are not yet workplace ready. In relation to entrepreneurship education, there is still a persistent challenge, with the All Party Parliamentary Group report on this highlighting a particular gap in England, as opposed to the rest of the UK, and Europe. Teachers remain at the heart of our future skills pipeline, and their time is a constrained resource. Addressing this gap, and wider skills challenges, is a job for industry and employers as much as government and educators.

Scaleup leaders remain keen to work with the education system to help the next generation as they enter the workforce. In particular, they are keen to engage and help to improve the quality of careers guidance (7 in 10) and help to increase the number of employer encounters (6 in 10) to help young people understand the opportunities that exist with businesses like theirs. When it comes to the curriculum, 5 in 10 scaleups would like to support its future development to ensure relevance to current business needs and are keen to see the inclusion of entrepreneurship modules, with four in ten seeking clearer forms of accreditation for digital skills.

However, they are also looking for support and funding to be able to offer work placements, traineeships and/or apprenticeships (7 in 10). Students need to experience work placements as standard throughout their further and higher education. This requires strong collaboration between stakeholders, including schools, colleges, the public, private and third sectors, as well as local scaleups. It also suggests that it is also time to rethink the way that work experience is structured, and revitalise the way in which it is delivered. The conventional format of two weeks’ experience in the summer is not intensive enough on its own to provide what school leavers will need in the modern world of work. There are other ways to provide insight into work, through multiple exposure to different workplaces or through social interaction. More than 13 million young people have benefited from the interactive tools provided by the Barclays LifeSkills programme, which includes a virtual work experience tool. Arranging appropriate work placements has been made easier through innovations such as F4S’ Workfinder app.

To meet scaleup needs, it is important to connect students with role models working in the scaleup economy through structured programmes, like F4S, and the Careers and Enterprise Company’s Career Hubs and other ScaleUp Institute endorsed programmes. 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. Every school and college should appoint a Careers Leader and be encouraged and funded to develop and implement a robust Careers Strategy, which includes encounters with scaling employers, provides time in the curriculum for further work experience and internships, and  expands opportunities for apprenticeships and traineeships. Increasing the number of employer encounters, focused on Real World Learning, to three per year (one per term) with at least two of those with local scaling firms will support this alignment. 

A remote form of work experience may also now be possible, removing 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. Mentoring could support and broaden their decision making about future careers especially if the mentors are from STEM/Computer science backgrounds.

We welcome the commitment to the continued rollout of these Career Hubs set out in the ‘Skills for Jobs’ paper. Now covering 65% of state sector schools, they are effective because they 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 with local skills and economic needs and should be expanded to provide full coverage, working hand in glove with Local Skills Improvement Plans (LSIP).

Innovate UK could also play a role in the development of the talent pipeline, helping to support educators with information and guidance on the skills required to drive innovation in the UK, and to promote role models and job opportunities. Utilising sector and innovation experts to inform young people about latest industry developments, the career paths that are open to them and the types of skills employers are looking for would also be a valuable way of supporting schools. This can also draw upon networks of scaleups Innovate UK supports to boost the ability of their leaders to connect with young people who may be future employees.

A closer alignment between education and scaling businesses – as will hopefully be the outcome from LSIP implementation – would be of mutual benefit, as it would also help to meet the talent demands of scaleups, and do so in a strategic way that also benefits the local area.

These connections are mutually beneficial to businesses and educators – providing businesses with expertise and facilities at the times they are needed, and enabling educators to develop and refine their understanding of the skills needs of local scaleups and adapt courses to cater for skills gaps. This can be formalised through the creation of local Hubs for talent and ‘ScaleUp Academies’, leveraging existing hubs, such as Catapults, the education sector and expertise of local scaleups.  

And scaleups themselves can become more confident in working with schools and colleges, which have increasing capacity and appetite to work with local businesses. More than 90% of UK secondary schools, 78% of UK further education colleges, and 86% of universities have now registered for the Lifeskills programme. ​​Scaleup leaders can connect to a local school through the F4S platform. To date, over 395,000 young people have engaged with an employer and created almost 1.3m student-employer encounters, with volunteer business leaders giving careers talks or participating in activities such as mock interviews and CV workshops. 

SENIOR LEADER SKILLS, LIFELONG LEARNING AND THE ROLE OF UNIVERSITIES AND BUSINESS SCHOOLS

As part of our Drivers of Local Growth work, we have shown that the involvement of universities is a very important part of developing and sustaining a healthy scaleup ecosystem at a local level. In all areas of the country, where scaleup growth is strongest this is supported by a strongly embedded University connection/ system. This is partly because of the coordination role that Universities can play within hub and cluster structures, but it also specifically highlights the vital role that they play as scaleups develop their talent pipeline and address their talent needs at all levels, from graduates, through to senior leadership team members, and Leadership education.

Developing skills of the senior leadership team remains a priority, with a particular focus on skills for sales / business development (59%) followed by brand building (47%) and strategy development (43%) skills. 6 in 10 are also focussed on upskilling their middle management teams. 4 in 10 are keen to augment their top teams with individuals who have experience of growing a business, but they are also keen to promote internally with 5 in 10 stating that this will be an important factor in their future growth.

It is important therefore for our Universities and Business schools to recognise what scaleups are looking for from the education system, in terms of their talent needs and engagement with scaling firms. There is clearly a need to enhance the role that universities and business schools can play in ensuring entrepreneurship is embedded into degree courses, as well as work experience / placements and encounters with scaleup companies, alongside specific recruitment channels, including access to researchers.

Technology transfer is a key part of the picture, with universities having an important role in translating IP and innovation into viable business models and scaleup businesses. To do this effectively, universities need to be aware of the wider growth economy and the investment environment in which the companies they are supporting will be operating, they also need to see to provide the right expertise and support to founders in order to encourage growth, not seek to gain early profit / equity from companies who may not have access to the right expertise to make clear decisions about their growth trajectory. Academics should also be supported and encouraged to spend time in industry, and particularly with scaleup businesses, bringing their expertise to bear and supporting innovation, but also taking real world skills back to the academic environment, supporting students themselves and the development of more effective, business oriented delivery of courses.

In particular, we believe that whilst many Universities are doing good work to foster their local scaling economy, more can be done, including: 

• Developing hub environments where scaling businesses and University campuses can coincide and scaling businesses can leverage academic/ research expertise, such as that in ScaleSpace partnered with Imperial College London; Engine Shed in Bristol; Strathclyde in Glasgow; Babraham in Cambridge, and; Alderley Park in Manchester.
• Evolving angel / investor communities from alumni such as that undertaken at MIT Venture Mentoring Service, which is similar to initiatives now being deployed in Henley and Aston. 
• Boosting the awareness of the growth economy within universities themselves through such initiatives as developing a Cambridge Cluster Insights in all areas backed by University insights and private sector capabilities;
• Ensuring academics / academic researchers are encouraged and supported to spend more time in industry, and that greater use can be made of entrepreneurs in residence. In the USA, academics are encouraged to go into industry and see this as ‘pathway up’ the academic ladder – this is not as true in the UK.
• Utilising further the UKRI / Innovate UK leverage and experience in this area to link up Universities, receiving research grants from UKRI resources / Research England etc. to the innovative scaling firms, which Innovate UK is working with, aiding in collaboration and innovation activity.
• All universities receiving a research grant should have to articulate what they are working on to support their local scale up economy. This kind of collaboration will be even more important if it is not possible for the UK to align with the Horizon Europe programme.

Innovate UK can also play a part in connecting scaleups to the academic community, helping them access academic expertise and research facilities, which Innovate UK, (including its wider networks as part of UKRI, and with the addition of KTN to its portfolio of services), has an unparalleled link back to academic institutions and their staff which can be developed and exploited. Existing mechanisms for scaling businesses to use these networks should be enhanced, connecting them with world class researchers and facilities to support ongoing innovation.

SUMMARY

Talent is vital to growth. As a country, we must ensure that we have both a highly skilled and robust domestic skills base, and ensure that we have the right policies in place to bring in additional talent and skills from abroad to enable scaleup businesses to fulfil their growth potential.

The Introduction of the Scaleup Visa is hugely welcome – but to make this work effectively for scaleup businesses, it needs to be well understood by companies seeking new talent in order to grow, with this knowledge well connected to local areas and hubs and wider parts of the scaleup ecosystem. Domestically, the introduction of Local Skills Improvement Plans could serve as a further key connection point between the education system, local skills needs and local businesses.

However, each of these initiatives will only have impact if they are part of a concerted effort nationally, and locally, to fully align these resources towards scaleup companies, ensuring that they are aware of the programmes, and that local actors within education, academia and business are effectively incentivised to make best use of them.

This means building upon what works, and actively seeking to connect the different parts of the ecosystem together, including schools, universities and business schools, making it easy for employers, school leavers, academics and those seeking to re-skill to find the resources they need, and the jobs that are on offer.