Skills shortage in the UK: what that means for your organisation

Whilst research tells us there are skills shortages in most areas of the economy, in many cases the skills identified as most in need, aren’t actually being trained for inside organisations or are low down the priority list. Whilst reskilling and upskilling are still seen by many employers as ‘nice to have’ employee benefits, they’re going to become vital aspects of future strategy for organisations looking to avoid the impact a future skills shortage could have on growth and profitability.

We look at the scale of the UK’s skills shortage, the skills challenges of the future and how organisations and HR can build resilience in their workforce. We’ll also look at specific sector and analyse the hospitality, engineering, construction, and manufacturing skills shortages.

The Office for National Statistics (ONS) recently reported that official vacancies in the UK stood at 816,000. There has been a fluctuating trend overall, but this figure does represent a decrease of 98,000 (10.7%) from the same period last year. There is still a general labour shortage in the UK but the trend is relatively positive in terms of vacancies coming down. However, shortages in industries such as healthcare remain an issue. The NHS Long Term Workforce Plan estimates a shortfall of approximately 150,000 full-time equivalents (FTEs) in the NHS workforce As of January 2025, there were also about 46,828 vacant nursing positions in the NHS. 

Apart from the shortages in number, there is also a shortage of skills to fill the required roles. Projections indicate that 50% of all employees will require reskilling by 2025 to meet evolving job requirements. 

How can reskilling impact the UK skills shortage?

The UK continues to face significant skills shortages, with 62% of organisations reporting difficulties in finding workers with the right skills, according to The Open University’s Business Barometer 2024. While this figure shows a slight improvement from 73% in 2023, the impact remains substantial. Skills shortages are increasing workloads for existing staff, preventing the adoption of emerging technologies like AI and green innovations, and costing the UK economy an estimated £39 billion annually. Without decisive action, this economic burden is expected to persist through 2027.

This impacts individuals as much as organisations. Millions of people lost their jobs as a result of COVID-19, but the types of jobs emerging from the crisis are now very different from the ones that have been lost, leaving a gap between the new skills required and those that exist in the job market. Growing automation and the skills required to adapt is also putting a strain on other areas of society, from smaller businesses struggling to keep up with the new skills required.

According to the Department for Education’s Employer Skills Survey 2022, skills shortages remain a significant challenge for the UK workforce. The survey, which gathered responses from nearly 73,000 employers across England, Wales, and Northern Ireland, highlighted a decline in training provision and investment. Only 60% of employers provided training for their staff in the last 12 months, down from 66% in 2017. Additionally, 49% offered on-the-job training (a decrease from 53% in 2017), and just 39% provided off-the-job training, compared to 48% five years prior. As a result, the proportion of employees receiving any form of training dropped slightly to 60%, and the average investment in training per employee fell to £1,780, down from £2,010 when adjusted for inflation. 

This reduction in training exacerbates the skills gap, leaving many roles unfilled and increasing the number of "skills-shortage vacancies" (SSVs). 

The World Economic Forum’s Future of Jobs Report 2025 forecasts that by 2030, 86% of businesses will be transformed by AI. This digital transformation is expected to create 170 million new roles worldwide. The report also highlights that 39% of current skills will be outdated by 2030 and employers are prioritising upskilling to address these changes. AI is most likely to be implemented in a supportive role, with only 33% of tasks expected to be performed solely by humans by 2030, down from 47% today. Automation is projected to handle 34% of tasks, and human-machine collaboration will increase to 33%. 

However, the rise of automation is affecting higher and lower-skilled workers differently. For example, new technological processes tend to support the more highly skilled professions, helping to automate manual tasks for example. This in turn increases the demand for these services and the professionals to provide them. However, automation is increasingly replacing lower-skilled jobs completely. Research by ONS indicates that lower-skilled and routine-based jobs are more susceptible to automation replacement. However, it’s again important to note that replacement in most parts is not the aim when you implement AI. According to the  the Tony Blair Institute for Global Change, adoption of AI across the public-sector workforce could save around one-fifth of workforce time at a comparatively low cost. 

Securing staff with strong digital awareness and/or the capacity to expand their know-how in this area is an increasingly important consideration for organisations, though the digital skills shortage is increasingly putting organisations at risk of missing out on opportunities for future growth and investment. For example, the 2024 State of the Digital Decade report states that only 55.6% of the EU’s population has at least basic digital skills.

We know that some sectors have been impacted more than others by the shortage of skilled workers – and by labour shortages more generally.

Hospitality skills shortage

Prior to the pandemic, only 4-5% of workers in retail and hospitality were undertaking reskilling. By September 2021 job advertising numbers were running at approximately 150% of pre-pandemic levels, suggesting a shortage of workers for these roles. Having been impacted badly by the pandemic, the travel and tourism sector has witnessed a drive to automate back-end processes – just one consequence of the impacts it has felt. But this will also put many people out of work, or create the need for new skills not readily available in the sector.

Information skill shortage

In the information and comms sector, meanwhile, resilience, stress tolerance and flexibility are increasingly sought-after skills that are as yet fairly poorly represented within that arena. Similarly, in professional services, there is a growing requirement for soft skills such as analytical thinking and innovation but these don’t feature at the top of current training programmes in this sector. Competition for attracting, retaining, and developing talent is incredibly high. This makes up one of the most impactful tech challenges facing business. To discover how to tackle this challenge in the information and comms sector, download our 'An Actionable Guide to Navigating HR Tech Challenges' guide.

Construction skills shortage

In construction, manufacturing and engineering, 1 in 3 vacancies are now hard to fill due to a shortage of skilled employees with the right qualifications or experience. The construction industry is experiencing persistent labour shortages, particularly among bricklayers, carpenters, electricians, and plumbers. These deficits have led to project delays and increased costs. To address this, the UK government has pledged £600 million to tackle construction skills shortages, aiming to train up to 60,000 skilled workers by 2029, as reported by Reuters. If you are looking for strategies to combat skill shortages, download our guide to 'Navigating HR Tech Challenges', which provides actionable strategies to the skill shortage, and other tech challenges HR departments currently face.

Manufacturing skills shortage

With manufacturing in particular, there’s a growing demand for reskilling and upskilling programmes to focus on more digital skills, from systems analysis and evaluation, as well as technology design and programming. In a survey of 570 HR managers, the VDMA found that 78% experienced challenges in finding those with qualifications in areas such as engineering, while 82% struggled to find skilled workers that have completed vocational training. As of September 2024, there were approximately 61,000 manufacturing job vacancies in the UK, according to Barclays.

Engineering skills shortage

EngineeringUK shared the scale of the problem, reporting a shortfall of up to 59,000 people in meeting the annual demand for 124,000 core engineering roles in the UK, with another 79,000 each year with a mix of engineering and other skill sets, likely in line with moving towards a more digital and green economy. Green engineering jobs have seen a 55% increase in job postings over the past five years without a corresponding rise in qualified candidates. This points to an engineering skill shortage that is likely to continue due to the growth of demand for green skills across industries.

Many organisations are reviewing their recruitment strategies in light of the skills shortages. The Institute of Student Employers found that 23% of companies were now planning to switch from hiring university or college leavers to young people with only school-level education. This move would see employers investing in vocational training for early-career employment, providing the more specific skills and on-the-job training required for their future workforce and diversifying their talent pool. 

1. Invest in training and development 

Continuous investment in workforce training is crucial. The New Economics Foundation reports that between 2011 and 2022, employer investment in skills declined by 19% per employee in real terms. 

2. Offer apprenticeships and vocational training 

Providing apprenticeships and vocational programs can cultivate a skilled talent pipeline. However, there is a mismatch between the demand for apprenticeships and available placements, with many qualified applicants unable to secure positions, according to the Financial Times. 

3. Partner with colleges and universities 

Partnering with schools, colleges, and universities can help align learning with industry needs, producing graduates equipped with relevant skills, particularly digital ones. 

4. Effective workforce planning and development 

Proactively identifying current and future skill requirements allows organisations to address potential shortages effectively. Establishing dedicated teams to coordinate workforce development efforts can be beneficial. For more information on effective workforce management and planning, visit our Workforce Management Hub. 

5. Use Government initiatives 

Engaging with government programs designed to address skill shortages can provide additional support. For instance, the UK government has pledged £600 million to train up to 60,000 skilled workers by 2029, focusing on sectors like construction. 

6. Build a learning culture 

Encouraging employees to pursue continuous learning and providing resources for professional development can help maintain a skilled and adaptable workforce. 

Other organisations are including reskilling and upskilling in their strategic workforce plans and underpinning this with robust performance management frameworks. These are useful to visually map talent and succession plans. Those that are able to identify the skills required for their future roles and map with the competencies that their existing employees possess will be best placed to support employee development and avoid future skills shortages.

Skills such as complex problem solving, negotiation and emotional intelligence are now increasingly recognised as essential skills, rather than ‘nice to have', enabling organisations to upskill and reskill their internal talent who already have the ‘right’ attitudes, values and shared commitment to business goals. Employers are now investing in developing these ‘soft’ skills in order to be adaptable and resilient to future skills requirements, by nurturing existing talent, restructuring departments to move people in manual or admin heavy roles being replaced by automation into other growing areas of the business, and cutting down on the need to recruit externally.

Whatever your future skills strategy involves, it’s likely to be supported by the right tools and technology to measure its success. For larger organisations with long term growth goals, this will likely include talent and performance management software to help map the future skills required and to identify current competencies and skills gaps. This is usually accompanied by a blend of face-to-face training and eLearning with mobile and self-serve capabilities so that employees can develop their skills in-line with the competencies required in their performance plans, but also with their own personal development in mind.

For example, employee career development software can empower employees to take control of their own skills development. Investing in ways to support employee development can help in counteracting potential future skills shortages. It helps support internal talent mobility and in the process, talent retention, benefiting both the individual for their development and the employer in developing the skills they need for the future.

Organisations that are able to demonstrate that they invest in the development of their employees are more likely to avoid future skills shortages and be equipped to retain and develop the talent they already have.

Talent and performance management software makes up an important part of the HR suite, where you can manage the employee lifecycle end-to-end. PeopleXD Evo is our end-to-end, AI-enabled HR solution, with integrated people analytics and built-in payroll. As a unified HCM suite, it can allow you to analyse patterns and determine any skills gaps in your organisation. From there, you can gain insights and take actionable steps to drive business impact. 

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