Wasted government funds should be directed to nearly half of engineering firms suffering from a digital skills gap, says the Institution of Engineering & Technology (IET), as a digital skills deficit is costing the UK economy £63bn a year
In a fresh review by the IET of skills within engineering and technology – a key sector to help the UK reach its net zero targets – shockingly 47% of employers report a digital skills gap within their current workforce, with 45% of those specifying a lack in adapting to new equipment or IT skills.
Looking at the external labour market, it’s a similar story with over half (54%) of employers experiencing a skills gap, with 42% of those specifying gaps around adapting to new equipment or IT skills.
Of those surveyed, many employers with a digital skills gap say that it reduces productivity (49%), particularly in the manufacturing sector (57%), as well as harms innovation (35%) and growth (35%). Nearly 30% of employers stated that it also reduces the ability to deliver contracts (29%).
Digital skills are on the rise
Almost all (92%) engineering and technology employers with a digital skills strategy require additional skills to deliver the strategy across innovation, agile thinking and management skills.
Skills in emerging technologies are expected to be more important than ever in the future, such as artificial intelligence (36%), extended reality (22%) and quantum engineering/computing (22%). Looking ahead to the future, 31% of employers say that artificial intelligence/machine learning will be important to sector growth. However, 50% of these employers say they don’t have the necessary skills in this area.
Plugging the growing digital skills gap
In response, the IET is calling for the government to look at ways to prioritise unspent funding to meet demand for the future. This could involve making the Apprenticeship Levy more flexible for employers, so that they can upskill and reskill employees to plug the UK’s growing digital skills gap.
Since 2017, large employers have been required to contribute 0.5% of their total annual pay bill to the Apprenticeship Levy – a fund for apprentice training which remains available to the paying employer for up to two years.
However, research shows that only 4% of employers are making full use of levy funds. In fact, recently released figures reveal that over £2bn raised by the levy has been returned to the Treasury since it was introduced.
In other words, these funds are not being used as intended to upskill the UK labour market and, in many cases, the levy is transferring money away from training opportunities.
The Apprenticeship Levy could unlock huge potential
This presents a great opportunity. These otherwise unspent funds could instead be redirected to upskilling the current UK workforce. As the majority of 2030’s engineers are already in work, upskilling and reskilling today’s workforce will be vital in addressing tomorrow’s challenges, from reaching net zero to reaping the benefits of artificial intelligence.
The UK’s digital skills strategy must align with the needs of employers and reskilling the current workforce must be a major part of the solution. Most employers support this – 74% of engineering employers view their staff as “agile” and generally respond to skills gaps by providing more training, rather than hiring externally. Boosting the UK’s digital skills capability can unlock our huge technological potential and boost growth.
This is the sixteenth year that the IET has published a skills report. The fieldwork was conducted online with 1,235 senior decision-makers in engineering organisations between 27 September and 30 October 2022 by market research agency YouGov.
The IET presented the findings of its survey to parliamentarians at the Parliamentary & Scientific Committee on Tuesday 7 February. The IET’s Skills for a Digital Future is available on the IET’s website.
Dr Graham Herries
Chair, Innovation & Skills panel
Institution of Engineering & Technology
Tel: +44 (0)1438 313 311
